3325 


i 

EXTRA  SHEETS  FROM  SPAULDING'S 
HI-S  j?.0;BY 

,  o  F" 

LEGAL  TENDER  PAPER  MONEY 

ISSUED  DURING  THE 

great  Rebellion. 


LEGAL  ACT. 


FUNDING  ITS  ORIGINAL  OBTECT.— HOW  IT  H  AS  BEEN  ABUSED  AND  PERVERTED.— 
MISTAKES  OF  THE  TREASURY  DEPARTMENT.— VACILLATING  COURSE 
OF  CONGRESS. -ANTAGONISM  OF  THE  SUB-TREASURY. 


DECISION  OF  THE  UNITED  STATES  SUPREME  COURT.-LEGAL  TENDER  ACT  ONLY 
A  TEMPORARY  WAR  MEASURE.— NEW  ISSUES  ON  NEW  ENGRAVED 
PLATES  ARE  UNCONSTITUTIONAL. 


LETTERS  EROM  HUGH  McCULLOCH,  CHARLES  FRANCIS  ADAMS,  JOHN  J.  CISCO, 
SENATORS  MORRILL,  MORTON,  HOWE,  SHERMAN.  AND  OTHER 
PROMINENT  BUSINESS  MEN  AND  FINANCIERS 
FROM  ALL  PARTS  OF  THE 
UNITED  STATES. 


SECOND  EDITION,  DECEMBER,  1875. 


33  TJ  S'  FAY  3A  O  : 

Baker,  Jones  &  Co.,  Printers  and  Binders,  220  and  222  Washington  Street. 


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INDEX  TO  THE  HEW  IHTR0DUCTI0N-1815. 


PAGE 

Secretary  Chase’s  first  mistake  in  rejecting  the  bank  check  in  1861,  -  -  1 

Antagonism  of  the  Sub-Treasury  act  and  its  suspension — Mr.  Chase 

refuses  to  recognize  its  suspension,  -------  2 

[See  also  historical  letters  of  Geo.  S.  Coe  and  -T.  E.  Williams,  Appendix, 
pages  89  to  99.] 

The  Banks  and  Sub-Treasury  suspend  specie  payments — Mr.  Chase  in 
breaking  the  banks,  at  the  same  time  broke  the  Sub-Treasury,  and 

both  were  discredited  together, . 3 — 4 

Legal  tender  act  introduced  by  Mr.  Spaulding,  Dec.  30,  1801,  -  -  -  4 

The  primary  object  of  the  act  was  to  f  und  the  debt,  -  5 

It  was  a  “  temporary  war  measure . 5 

Title  of  the  act  was  to  “ fund  the  greenbacks  and  floating  debt”  into  6 
per  cent,  gold  bonds — First  legal  tender  notes  issued  March  10, 
1862,  with  endorsement  on  the  back  to  fund  in  6  per  cent,  gold 

bonds, . 7 

Second  $150,000,000  legal  tenders  authorized, . 8 

Second  great  mistake  of  Secretary  Chase — Abrogation  of  the  right  to 

fund  the  greenbacks  in  6  per  cent,  gold  bonds,  -  8 — 9 

$900,000,000  loan  act, . 9—10 

Secretary  Chase  resigns — Gold,  2.85, . 10 

Mr.  Chase  to  Mr.  Spaulding,  July  15,  1869, .  11 

W.  P.  Fessenden,  Secretar}7-  of  Treasury,  July  5,  1864,  -  11 

Hugh  McCulloch,  Secretary  of  Treasury,  March  4,  1865,  -  -  -  -  11 

Secretary  McCulloch  not  supported  by  Congress, . 11 

$830,000,000  of  7-30  Treasury  notes  issued  to  pay  the  army,  and  which 

were  funded  in  three  jrears  into  6  per  cent,  gold  bonds,  -  11 — 12 

Geo.  S.  Boutwell,  Secretary  of  Treasury,  March  11,  1869,  -  -  -  12 

Third  mistake  of  Treasury  Department,  -  -  ’  -  -  -  -  12 

New  engraved  plates  and  new  issue  of  greenbacks,  four  years  after  the 

close  of  the  war, . 13 

Wm.  A.  Richardson,  Secretary  of  Treasury,  March  17, 1873 — $26,000,- 

000  inflation  of  the  currency, . 14 


IV 


Several  decisions  of  the  U.  S  Supreme  Court-  on  the  legal  tender  act — 

Only  justified  as  a  temporary  war  measure,  to  he  dispensed  with  as 
soon  as  possible  after  the  close  of  the  war,  ....  15 — ig 

Justice  Strong’s  letter  on  our  early  return  to  a  “  normal  condition ,”  -  16 

Atty.-Gen.  Hoar’s  letter  on  our  early  return  to  a  “  normal  condition ,”  -  17 

A  tender  of  the,new  emission  of  greenbacks  not  valid  (unconstitutional),  17  - 

President  Grant’s  veto  of  inflation  bill, . 17 

Assorting  Bureau  for  redemption  of  national  currency,  IS 

President  Grant’s  plan  for  resuming  specie  payments,  -  -  -  -  19 
Senator  Sherman’s  law  for  resuming  specie  payments,  January  1,  1879,  20 
When  the  gold  standard  is  reached,  the  surplus  of  paper  currency  will 

be  retired, . 23 

New  York  to  resume  Jan.  1,  1879,  Treasury  sales  of  gold  to  pay  current 
expenses,  because  the  revenue  is  insufficient,  is  discreditable  to  the 

government, . 24 

Secretary  Bristow  not  sufficiently  suj  ported  by  Congress,  25 

Conclusion, . 26 

Hon.  W.  H.  Seward’s  letter, . 27 

Hon.  Horace  Maynard, .  -  27 

Charles  Sumner,  E.  Corning,  S-  Hooper, . 28 

Senator  Sherman,  Secretary  Stanton,  and  H.  Hamlin,  -  *  -  -  29 

Benson  J.  Lossing,  W.  W.  Corcoran, . 30 

Senator  Morrill  and  Samuel  Hooper, . 31 

Horace  Greeley,  New  York  Tribune, . 32 


1 


SECOND  EDITION. 


INTRODUCTION. 

THE  LEGAL  TENDER  ACT.— FUNDING  ITS  ORIGINAL  OBJECT.— 
LIOW  IT  HAS  BEEN  ABUSED  AND  PERVERTED.— 
RESUMPTION  OF  SPECIE  PAYMENTS.—  * 
SUB-TREASURY  ACT,  &c. 

In  the  publication  of  a  further  edition  of  the  “  Financial  His¬ 
tory  of  the  War,”  prepared  by  me  in  the  winter  of  1869,  I  may 
be  indulged  in  a  few  words  in  vindication  of  the  Legal  Tender 
act  as  originally  passed,  and  some  criticisms  on  the  general  man¬ 
agement  of  the  Finances,  especially  the  mistakes  of  the  Treasury 
department  in  its  administration  of  that  act,  and  of  other  laws 
authorizing  the  issue  of  bonds  and  treasury  notes. 

As  chairman  of  the  sub-committee  of  ways  and  means,  having 
charge  of  this  subject,  I  became  very  much  identified  with  this 
legislation,  as  well  as  with  the  bank  bill  passed  during  the  second 
year  of  the  war. 

The  first  material  mistake  in  the  management  of  the  finances, 
occurred  when  Secretary  Chase  discarded  the  use  of  the  bank 
check,  and  the  clearing  house,  in  the  fall  of  1861.  The  Secretary 
of  War  might,  With  the  same  propriety,  have  rejected  the  rail¬ 
road,  the  locomotive,  and  the  telegraph.  The  modern  invention 
of  the  bank  check  and  the  clearing  house  for  the  transaction  of 
large  financial  operations  with  facility,  are  quite  as  useful  as  are 
railroads  and  telegraphs  in  carrying  on  military  operations  with 
success.  The  Secretary  of  War  did  not  fail  to  make  use  of  the 
railroads  and  the  telegraph,  but  the  Secretary  of  the  Treasury,  by 
sticking  to  the  sub-treasury,  and  rejecting  the  bank  check  and 
clearing  house,  committed  a  great  blunder  at  the  commencement 
of  the  war.  This  mistake  occurred  under  the  following  circum¬ 
stances  : 

Two  important  loan  acts  were  passed  at  the  extra  session  of 
Congress  in  July  and  August,  1861.  The  first  act  was  approved 
July  17th,  and  the  second  August  5th.  By  section  six  of  the  last 

QJ  C 

P  f  '**-’  AJ'  «  <* 


2 


mentioned  act,*  the  sub-treasury  act  passed  in  1846,  was  so  far  sus- 
ended  as  to  allow  the  Secretary  of  the  Treasury 


/  “To  deposit  any  of  the  moneys  obtained  on  any  of  the  loans  now  authorized 
by  law,  to  the  credit  of  the  Treasurer  of  the  United  States,  in  such  solvent 
specie  paying  banks  as  he  may  select ;  and  the  said  moneys,  so  deposited, 
may  be  withdrawn  from  such  deposit,  for  deposit  with  the  regular  author- 
•  ized  depositories,  or  for  the  payment  of  public  dues ,  or  paid  in  the  redemption 
of  the  notes  authorized  to  be  issued  under  this  act,  or  the  act  to  which 
this  is  supplementary,  payable  on  demand,  as  may  seem  expedient  to,  or  be 
directed  by  the  Secretary  of  the  Treasury.” 

The  primary  object,  which  Mr.  Appleton  and  myself  had  in 
view,  in  preparing  this  section,  was  to  relax  the  rigid  require¬ 
ments  of  the  sub  treasury  act,  in  regard  to  the  receipt  and  dis¬ 
bursement  of  coin,  and  instead  of  paying  solely  from  coin  deposits 
in  the  treasury,  to  allow  all  the  money  obtained  on  these  loans  to 
be  deposited  in  solvent  banks;  the  United  States  Treasurer  to 
draw  his  checks  directly  on  such  deposit  banks  in  payment  of  war 
expenses,  which  checks  would  be  paid  in  state  bank  notes  then 
redeemable  on  demand  in  gold,  or  in  the  ordinary  course  of  busi¬ 
ness,  to  a  large  extent,  they  would  pass  through  the  Rew  York 
clearing  house,  and  the  clearing  houses  of  other  cities,  and  be 
settled  and  cancelled  by  offset,  without  drawing  large  amounts  of 
specie.  This  mode  of  payment  would  have  enabled  the  Secretary 
more  easily  to  effect  such  loans,  and  make  his  large  disburse¬ 
ments,  without  materially  disturbing  the  coin  reserves  held  by 
the  banks,  which  were  then  w'ell  protected  by  these  reserves  in 
their  vaults. 

This  mode  of  making  the  disbursements  for  the  large  war  expenses 
was  regarded  by  me  at  that  early  period  of  the  war  as  of  vital 
consequence  to  the  stability  of  the  finances  of  both  government 
and  people;  hence  the  preparation  and  adoption  of  the  sixth  sec¬ 
tion  of  the  act  of  August  5,  1861,  giving  the  Secretary  of  the 
Treasury  discretionary  power  to  suspend  the  sub -treasury  law'  in 
respect  to  these  loans. 

After  the  battle  of  Bull  Run,  which  occurred  on  the  twenty- 
first  of  July,  of  that  year,  the  necessities  of  the  government  in 
clothing,  arming  and  feeding  troops — in  providing  munitions  of 
W'ar  and  building  a  navy — became  so  urgent  that  the  banks  in 
New  York,  Boston  and  Philadelphia  most  patriotically  came  for¬ 
ward  and  made  arrangements  in  several  negotiations  with  Secre¬ 
tary  Chase,  to  loan  to  the  government  $150,000,000  under  the  pro- 


3 


visions  of  the  two  loan  acts  passed  at  the  extra  session.  Of  this 
sura  $105,000,000  was  apportioned  to  the  associated  banks  in  the 
city  of  New  York  payable  by  instalments.  The  banks  were  then 
in  good  condition,  transacting  their  business  on  a  specie  basis,  and 
paid  coin  for  all  balances  at  the  clearing  house,  and  redeemed 
their  circulating  notes  in  coin,  and  the  loan  to  the  government 
was  made  with  the  expectation  that  the  money  would  be  deposited 
in  the  banks,  and  be  checked  out  under  the  direction  of  the  Secre¬ 
tary,  in  pursuance  of  the  sixth  section  above  referred  to.  The 
Secretary  of  the  Treasury  refused  to  use  the  discretionary  power 
conferred  upon  him  by  that  section,  and  would  not  check  on  the 
banks  for  the  expenses  of  the  war,  so  that  current  bank  notes  could 
be  paid  or  balances  settled  through  the  clearing  house,  but  in¬ 
sisted  that  the  banks  should  pay  the  money  loaned  into  the  sub¬ 
treasury  in  gold^or  gold  treasury  notes,  and  from  thence  it  was 
distributed  for  war  purposes  and  scattered  in  different  parts  of 
the  country.  By  far  the  greater  part  of  this  loan  was  paid  in 
gold  coin,  taken  from  the  reserves  of  the  banks  commencing  on 
the  nineteenth  of  August,  1861.  This  unnecessary  mode  of  re¬ 
quiring  the  payment  of  the  loans,  so  weakened  the  banks,  that  it 
brought  on  a  general  suspension  of  specie  payments,  during  the 
last  days  of  December,  1861.  Notwithstanding  the  banks  com¬ 
menced  making  advances  to  the  government  about  the  nineteenth 
of  August,  1861,  yet  none  of  the  securities  to  be  issued  by  the 
government  for  the  loans  were  turned  over  to  them  until  the  four¬ 
teenth  of  January,  1862. 

The  banks  having  been  committed  to  making  the  loans,  and 
having  made  partial  advances  on  account  of  the  same,  were 
obliged  to  complete  the  loan  notwithstanding  the  Secretary  of 
the  Treasury  deemed  it  incompatible  with  his  views  of  duty,  and 
the  traditions  of  the  sub-treasury  law,  to  use  such  banks  as  dis¬ 
bursing  agents  of  the  government,  even  under  the  extraordinary 
exigency  under  which  the  loans  were  made.  The  call  upon  theA 
banks  for  payment  into  the  government  depository  of  the  remain¬ 
ing  instalments  of  the  loan,  either  in  coin  or  gold  treasury  notes, 
was  persistently  urged  by  the  Secretary  until  the  final  closing  of 
the  transaction  on  the  third  of  February,  1862.  This  was  the  first 
material  mistake  of  the  Secretary  of  the  Treasury,  and  was  the 
first  step  in  the  wrong  direction,  wThich,  combined  with  other  im¬ 
portant  events,  led  to  the  necessity  of  passing  the  legal  tender 


4 


act.  The  Secretary  in  breaking  the  banks,  at  the  same  time  broke 
the  sub-treasury,  and  both  were  discredited  together.  Under  the 
policy  pursued,  the  state  bank  bills  which  wrere  local  in  character 
and  credit,  became  uncurrent  money,  and  the  available  gold  in 
the  country  was  wholly  inadequate  to  meet  the  gigantic  expenses  . 
of  the  war. 

“  A  meeting  of  bank  officers  was  held  at  the  American  Exchange  Bank  in 
the  city  of  New  York,  December  28,  1861.  One  of  the  bank  Presidents  in 
a  well  considered  speech  delivered  on  that  occasion,  criticising  the  course  of 
Secretary  Chase  in  regard  to  those  loans,  said  that 

“  ‘  He  (Secretary  Chase)  was  urged  to  draw  directly  on  the  banks.  Coin 
being  the  basis  of  credits  it  was  only  in  that  way  the  increased  financial 
operations  of  the  government  could  be  conducted ;  for  it  is  impossible  to 
maintain  the  superstructure  of  credit  when  the  basis  is  withdrawn,  for  in 
destroying  the  basis  the  superstructure  is  also  swept  away.  He  refused  to 
draw  directly  upon  the  banks  for  the  proceeds  of  the  ^oan  taken  by  each. 
We  are  informed  that  the  act  of  Congress  was  passed  expressly  for  the  pur¬ 
pose  of  authorizing  him  to  do  so,  but  he  gave  it  a  different  interpretation 
which  may  be  the  correct  one,  although  I  do  not  think  so.’  ” 

The  failure  of  the  Secretary  to  recognize  the  suspension' of  the 
sub-treasury  law,  fully  demonstrates  the  truthfulness  of  the  re¬ 
mark  made  by  Disraeli,  that  “upon  a  perfect  knowledge  and  right 
appreciation  of  details  the  settlement  of  great  questions  mainly 
depends.”  The  Secretary  was  intent  upon  having  the  gold  for 
disbursement,  without  fully  comprehending  the  effect  this  large 
drain  was  to  have  upon  the  banks  and  the  general  finances  of  the 
|  country. 

LEGAL  TENDER  ACT. 

The  suspension  of  specie  payments  by  the  banks  and  the  treas¬ 
ury  of  the  United  States  occurred  on  the  twenty-eighth  of  De¬ 
cember,  1861,  and  two  days  later,  on  the  thirtieth  of  the  same 
month,  I  prepared  and  introduced  the  legal  tender  act,  into  the 
House  of  Representatives.  The  histoiy  of  this  measure  in  its 
passage  through  both  houses  is  fully  set  forth  in  the  text.  The 
speeches  and  votes  of  members  on  both  sides  of  the  question  are 
given  in  detail  in  this  book,  commencing  at  page  six.  The  meas¬ 
ure  was  prominently  discussed  before  the  people  and  in  Congress 
for  mors  than  six  weeks.  It  passed  both  houses  and  received  the 
approval  of  President  Lincoln  February  25,  1862. 

It  is  a  fundamental  principle,  which  I  think  I  fully  compre¬ 
hended  when  I  introduced  this  act  into  Congress,  that  not  one 
dollar  of  paper  money  ought  ever  to  be  issued  by  the  govern- 


5 


ment,  or  by  any  bank,  without  at  the  same  time,  making  ample 
provision  for  its  prompt  redemption,  on  demand.  The  best  re¬ 
demption,  and  the  best  attainable  standard  of  value,  is  gold  coin, 
and  the  only  admissible  standard  in  time  of  peace.  It  was  an 
utter  impossibility  for  our  government  at  that  time  to  redeem  the 
legal  tender  notes  in  gold,  because  it  could  not  be  had  on  any 
terms;  it  was  not  in  the  country  in  sufficient  amount  to  meet  the 
great  emergency;  but  the  government  could  redeem  (fund)  the 
legal  tender  notes  in  six  per  cent,  twenty  years  gold  bonds.  And 
here  I  may  say,  most  emphatically,  that  if  these  six  per  cent, 
bonds  could  then  have  been  negotiated  for  any  funds  available, 
and  in  adequate  amount,  for  war  expenses,  not  one  dollar  of  legal 
tender  notes  would  have  been  issued.  This  could  not  be  done, 
and  the  act  was  framed  with  the  express  agreement  that  the  legal 
tender  notes  issued  under  it  should  be  redeemed  in  the  six  per 
cent,  gold  bonds.  The  second  section  of  the  act  authorized  the 
issue  of  $500,000,000  bonds  for  that  purpose. 

The  leading  object  of  the  legal  tender  act,  was  to  create  a  cur¬ 
rency  national  in  character,  which  could  be  used  for  liquidating 
war  expenses,  and,  to  prevent  any  plethora  or  redundency  of  such 
currency,  provide  at  the  same  time  for  funding  it  in  the  six  per 
cent,  bonds.  The  leading  object  was  to  fund  the  debt.  This  pro¬ 
vision  for  funding,  also,  in  a  great  measure,  relieved  the  act  of 
the  apparent  injustice  of  compelling  people,  by  the  legal  tender 
clause,  to  receive  this  currency  on  ordinary  debts  and  invested 
securities  when  they  could  immediately  upon  its  receipt,  convert 
it  into  six  per  cent,  gold  bonds  at  par. 

In  the  opening  speech  which  I  made  soon  after  I  presented  the 
bill  to  the  House,  (see  History,  page  29)  I  said 

“  The  bill  before  us  is  a  war  measure,  a  measure  of  necessity ,  and  not  of 
choice,  presented  by  the  committee  of  Ways  and  Means  to  meet  the  most 
pressing  demands  upon  the  treasury  to  sustain  the  army  and  navy  until  they 
can  make  a  vigorous  advance  upon  the  traitors  and  crush  out  the  rebellion. 
These  are  extraordinary  times  and  extraordinary  measures  must  be  resorted 
to,  in  order  to  save  our  Government  and  preserve  our  nationality.” 

• 

After  a  full  presentation  of  the  scope  and  object  of  the  bill, 
and  an  argument  in  favor  of  its  constitutionality,  as  a  war  meas¬ 
ure,  and  as  a  means  of  carrying  into  full  effect  the  war  power, 
granted  in  the  constitution,  substantially  as  has  since  been  de- 


6 


cided  by  the  U.  S.  Supreme  Court,  I  closed  my  first  presentation 
of  the  bill  to  the  House  as  follows: 

“It  is  plainly  within  the  scope  of  the  constitution  that  the  government 
should  maintain  itself;  that  the  army  should  be  supported;  that  the  navy 
should  be  maintained.  The  ways  dnd  means  of  doing  this  are  left  to  Con¬ 
gress  to  provide.  Congress  may  do  this  entirely  by  taxation.  It  may  pro¬ 
vide  by  law  to  levy  and  collect  taxes  enough  every  year  to  pay  the  whole 
expenses  of  the  war,  during  each  current  year,  and  so  ‘pay  as  we  go.’  It 
may  issue  six  per  cent,  bonds  and  sell  them  on  the  market  for  what  they  will 
bring — even  if  they  will  not  sell  for  over  fifty  cents  on  the  dollar — to  raise 
money  to  carry  on  the  war.  It  may  issue  treasury  notes  payable  on  demand, 
and  make  them  a  legal  tender  in  payment  of  debts.  Either  one  or  all  of 
these  modes  of  paying  the  expenses  of  the  government  is  left  to  the  discre¬ 
tion  of  Congress.  Either  mode  is  constitutional;  and  it  is  left  to  the  sound 
discretion  of  Congress  to  decide  which  m6de  it  will  adopt,  or  whether  it  will 
adopt  a  part  of  each,  as  being  the  best  in  the  present  crisis.  My  own  im¬ 
pression  is,  that  it  will  be  best  for  us  to  adopt,  in  part,  all  of  these  modes 
for  providing  the  means: 

“  1.  Raise  by  taxation,  the  current  year,  over  and  above  the  amount  re¬ 
ceived  from  duties  on  imports,  the  sum  of  $150,000,000. 

“2.  Issue  $100,000,000  of  demand  treasury  notes  in  addition  to  the 
$50,000,000  authorized  in  July,  making  them  legal  tender  in  payment  of 
debts,  and  exchangeable  at  any  time  for  six  per  cent,  twenty  years’  bonds; 
with  a  further  issue  of  demand  notes,  if  Congress  shall  hereafter  deem  it 
necessary. 

“3.  Provide  for  the  issue  of  all  the  twenty  years’  six  per  cent,  bonds  that 
may  be  necessary  to  fund  the  demand  treasury  notes,  and  other  fundable 
treasury  notes,  that  may  be  issued  (say  $500,000,000  six  per  cent,  twenty 
years’  coupon  bonds),  and  pledge  $30,000,000  of  the  annual  taxes  to  pay  the 
interest  halt-yearly  thereon,  and  pledge  $25,000,000  more  as  a  sinking  fund  to 
redeem  the  principal  in  twenty  years. 

“4.  This  tax  of  $150,000,000  would  afford  an  ample  basis  on  which  to 
rest  the  credit  of  the  government  for  this  large  issue  of  treasury  notes  and 
bonds,  and  would  insure  th*  punctual  payment  of  the  interest  to  the  capital¬ 
ists  who  might  hold  them. 

‘  ‘  The  demand  notes  put  in  circulation  would  meet  the  present  exigencies  of 
the  government  in  the  discharge  of  its  existing  liabilities  to  the  army,  navy 
and  contractors,  and  for  supplies,  materials  and  munitions  of  war.  These 
notes  would  find  their  way  into  all  the  channels  of  trade  among  the  people; 
and  as  they  accumulate  in  the  hands  of  capitalists  they  would  exchange  them  for 
the  six  per  cent,  twenty  years’  bonds. 

“  These  circulating  notes  in  the  hands  of  the  people  would  enable  them  to 
pay  the  taxes  imposed,  and  would  facilitate  all  business  operations  between 
farmers,  mechanics,  commercial  business  men  and  banks,  and  be  equally  as 
good  as,  and  in  many  cases  better ,  than  the  present  irredeemable  circulation  is¬ 
sued  by  the  banks. 


7 


“  Tlie  $500,000,000  six  per  cent,  twenty  years’  bonds  in  the  hands  of  the 
Secretary  of  the  Treasury  ready  to  be  issued  would  afford  ample  opportunity 
tor  funding  the  treasury  notes  as  fast  as  the  capitalists  might  desire  to  exchange 
treasury  notes,  not  bearing  interest,  for  coupon  bonds  of  the  United  States, 
bearing  six  per  ceent.  interest,  and  amply  secured  by  a  tax  upon  the  people 
ami  all  their  property. 

“  In  this  way  the  government  will  be  able  to  get  along  with  its  immediate 
and  pressing  necessities  without  being  obliged  to  force  its  bonds  on  the  mar- 
ket  at  ruinous  rates  of  discount;  the  people,  under  heavy  taxation,  would  be 
shielded  against  high  rates  of  interest;  and  the  capitalists  will  he  afforded  a 
fair  compensation  for  the  use  of  their  money  during  the  pending  struggle  of  the 
country  for  national  existence .” 

From  this  brief  statement  of  the  inception  of  the  legal  tender 
act,  it  will  be  seen  that  it  was  a  temporary  war  measure;  that  this 
greenback  curiency  was  recei'veable  for  internal  taxes  and  all 
other  dues,  except  customs  duties  and  interest  on  the  funded 
debt;  that  a  sinking  fund  was  provided  of  one  per  cent,  each 
year  of  the  entire  debt  of  the  United  States  after  July  1,  1862, 
and  the  whole  of  this  temporary  currency  and  all  the  floating 
debt  of  the  United  States  was,  by  the  second  section  of  the  act, 
fundable  (redeemable)  in  six  per  cent,  gold  bonds.  The  title  of 
the  act  was  very  expressive.  “  An  act  to  authorize  the  issue  of 
United  States  notes  and  for  the  redemption  or  funding  thereof  and 
for  funding  the  floating  debt  of  the  United  States.”  The  govern¬ 
ment  could  not  redeem  in  gold,  but  could  redeem  in  bonds  issued 
on  its  credit.  These  legal  tender  notes  were  in  substance  and 
effect,  certificates  of  debt  given  for  war  expenses  redeemable  on 
demand  in  these  bonds.  Thus,  the  fundamental  principal,  that  no 
paper  currrency  should  ever  be  issued,  without  providing  at  the 
same  time,  for  its  prompt  redemption,  was  provided  for  in  the 
best  mode  in  which,  under  the  unparalled  emergency,  the  govern¬ 
ment  was  able  to  provide  for  it. 

The  first  legal  tender  notes  issued  under  the  act  bore  date  March 
10,  1862,  and  had  printed  on  the  back  of  them  these  words: 

“This  note  is  a  legal  tender  for  all  debts  public  and  private,  except  duties 
bn  imports  and  interest  on  the  public  debt,  and  is  exchangeable  for  U.  8.  six 
per  cent,  bonds  redeemable  at  the  pleasure  of  the  United  States ,  after  five  years” 

These  notes  in  the  form  of  greenback  currency  were  immedi¬ 
ately  issued  by  Secretary  Chase  and  disbursed  for  war  expenses, 
and  the  treasury  of  the  United  States  was  very  soon  relieved  of 
the  pressing  demands  that  were  made  upon  it.  The  army  and 


8 


navy  were  paid,  and  supplies  and  materials  of  war  obtained  on 
these  paper  promises  in  sufficient  quantity  to  prosecute  the  war 
with  vigor. 

The  first  edition  of  legal  tender  notes  were  by  the  gigantic  war 
expenses  very  soon  exhausted.  On  the  seventh  of  June,  1862, 
Secretary  Chase  sent  an  official  communication  to  the  Committee 
of  Ways  and  Means  asking  for  a  further  issue  of  $150,000,000  of 
legal  tender  notes,  and  that  a  part  of  this  emission  should  be  in 
one  dollar  notes,  the  previous  emission  having  all  been  issued  in 
notes  of  five  dollars  and  upwards.  (Legal  tender  History,  page 
154.)  In  this  communication  Mr.  Chase  urged  in  favor  of  small 
bills,  and  said  “it  may  further  be  properly  observed  that  since  the 
United  States  notes  are  made  a  legcd  tender  and  maintained  at  near 
the  par  of  gold  by  the  provision  for  their  conversion  into  bonds 
bearing  six  per  cent,  interest  payable  in  coin ,  it  is  not  easy  to  see 
why  small  notes  may  not  be  issued  as  wisely  as  large  ones.” 

This  quotation  is  made  for  the  purpose  of  showing  how  im¬ 
portant  it  was  deemed  at  that  time,  that  all  the  greenback  cur¬ 
rency  should  be  redeemable  in  gold  bonds. 

I  made  the  opening  speech  on  the  bill  in  favor  of  this  further  issue 
of  the  legal  tender  notes.  In  the  course  of  my  remarks  I  said: 

“  The  soldiers  and  s  ^lors  give  their  services,  risk  their  lives  and  endure  all 
the  hardships,  sickness  and  privations  of  the  campaign,  and  cheerfully  take 
these  notes  in  payment.  Supplies,  subsistence  and  material  of  war  of  every 
kind  is  eagerly  furnished,  and  these  greenbacks  taken  in  exchange  for  the 
same.  This  kind  of  loan  is  so  popular  with  the  people,  and  being  without 
interest,  is  so  advantageous  to  the  government,  it  is  desirable  that  it  should 
be  extended  so  far  as  it  can  be  done  safely,  and  without  unduly  stimulating 
speculations  to  such  an  extent  as  to  cause  an  unfavorable  reaction  to  the  le¬ 
gitimate  business  of  the  country.  But  when  bonds  can  be  negotiated  at  par  1 
think  it  will  be  safer  to  have  bonds  negotiated  than  to  issue  legal  tender  notes .” 

The  act  for  this  additional  issue  of  greenback  currency  was 
passed  and  approved  by  President  Lincoln,  July  11,  1862.  It  pro¬ 
vided  that  the  notes  should  be  redeemed  on  demand  in  the  six 
per  cent,  gold  bonds.  « 

SECOND  MISTAKE. 

The  great  mistake — greater  than  all  other  mistakes  in  the  man¬ 
agement  of  the  war — was  the  abrogation  of  the  right  to  fund 
the  greenback  currency  in  gold  bonds,  as  provided  for  in  the  two 
preceeding  acts. 

All  the  other  mistakes,  civil  and  military,  which  occurred  during 


9 


the  war  were  of  slight  consequence  when  compared  with  the  mis¬ 
chievous  and  grave  consequences  resulting  from  this  one  mistake. 
Taking  away  from  the  holder  of  this  paper  money  the  right  to 
have  it  redeemed  on  demand  in  gold  bonds,  besides  being 
manifestly  unjust  to  the  holders,  let  the  government  and  the 
whole  country — banks  and  people — down  into  the  slough  of 
an  irredeemable  paper  currency,  where  we  have  remained  for 
over  eleven  years.  From  1864  to  1875  it  has  been  a  dead  weight 
on  the  business  and  industry  of  the  country,  without  elasticity, 
and  without  any  provision  whatever  being  made  for  its  redemp¬ 
tion  or  payment.  Its  redundency  and  consequent  depreciation 
has  operated  very  injuriously  to  the  legitimate  business  of  the- 
country.  It  was  an  instrument  of  expenditure  representing  the 
waste  of  war,  and  not  possessing  the  essential  elements  of  a  com¬ 
mercial  currency.  A  majority  of  the  people,  however,  have  been 
deluded  into  the  belief  that  those  broken  promises,  representing 
the  waste  of  war,  were  money,  and  a  proper  standard  of  value  as 
a  basis  for  doing  business,  and  have  plunged  headlong  into  all 
sorts  of  speculations,  unprofitable  enterprises,  extravagance  in  living 
general  abuse  of  credit,  idleness,  and  consequent  demoralization. 

If  the  right  to  fund  the  greenbacks  into  the  six  per  cent,  gold 
bonds  had  not  been  abrogated,  no  financier  or  practical  business 
man,  whose  opinion  is  worth  quoting,  can  doubt  that  we  would 
have  gone  to  specie  payment  within  two  or  three  years  after  the 
close  of  the  war,  in  spite  of  ourselves.  The  individual  indebted¬ 
ness  at  the  close  of  the  war  in  1865  wras  small.  Every  one  was 
comparatively  free  from  debt.  The  six  per  cent,  gold  bonds  were 
sought  for  as  an  investment.  They  soon  appreciated  to  par  in  gold, 
and  if  the  right  to  fund  had  been  continued,  the  greenback  currency 
wrould  have  appreciated  to  par  in  gold  along  with  bonds.  The 
legal  tender  act  would  have  served  its  purpose  as  a  war  measure, 
and  we  would  have  returned  to  the  specie  standard  without  ma¬ 
terial  detriment  to  the  legitimate  business  of  the  country.  In 
this  way  we  would  have  avoided  a  large  part  of  the  extravagance 
and  demoralization  that  has  been  so  reckless  since  the  close  of 
the  war. 

The  circumstances  leading  to  this  mistake  are  fully  set  forth  in 
the  Financial  History  of  the  War,  pages  188  to  198,  but  I  will 
briefly  recapitulate  the  facts.  The  $900,000,000  loan  act  was 
passed  and  approved  by  the  President  March  3,  1863.  At  the 


10 


urgent  request  of  Secretary  Chase  a  clause  was  inserted  in  the 
act,  taking  away  the  absolute  right  of  the  holders  of  greenbacks 
to  fund  them  into  six  per  cent,  gold  bonds  after  July  1,  1863,  and 
leaving  it  discretionary  with  the  Secretary  to  allow  them  to  be 
funded  or  not,  as  he  might  deem  best  for  the  public  interest. 
Under  this  discretionary  power  the  Secretary  allowed  them  to  be 
funded  up  to  January  21,  1864.  The  legal  tender  act  had  worked 
well  and  all  of  the  $500,000,000  six  per  cent,  bonds  authorized  by 
the  first  act  had  been  taken  up  at  par.  The  Secretary  then  de¬ 
cided  that  he  would  not  allow  any  more  funding  in  the  six  per 
cent,  bonds,  but  would  allow  the  holders  of  the  greenbacks  to 
fund  them  in  a  five  per  cent.  bond.  This  mistake  of  the  Secretary 
arrested  the  funding  of  the  greenbacks  into  bonds,  and  materially 
depreciated  and  lowered  the  standard  of  this  currency. 

This  attempt  of  the  Secretary  to  float  five  per  cent,  bonds  made 
it  necessary,  in  order  to  meet  the  enormous  war  expenses,  to  issue 
and  keep  out  large  amounts  of  currency  in  the  form  of  green¬ 
backs,  interest  bearing  notes,  certificates  of  indebtedness,  frac¬ 
tional  currency  and  national  bank  notes,  besides  the  irredeemable 
currency  issued  by  state  banks.  Gold  and  commodities  continued 
to  advance  in  price.  On  the  fifteenth  of  January,  1864,  gold  was 
$1.55,  on  the  fifteenth  of  April,  $1.78,  on  the  fifteenth  of  June, 
$1.97,  and  on  the  twenty-ninth  of  June,  $2.35  to  $2.50,  which 
showed  that  the  legal  tender  notes  were  then  only  worth  forty 
cents  on  the  dollar  in  gold.  The  next  day,  the  thirtieth  of  June, 
1864,  Mr.  Chase  resigned  the  office  of  Secretary  of  the  Treasury. 
At  this  time  the  inflating  paper  issues  outstanding  were  over 
$1,100,000,000,  and  in  a  few  days  thereafter  gold  reached  its 
highest  quotation,  $2.85,  or  more  accurately  speaking  greenbacks 
depreciated  until  they  were  only  worth  in  gold  thirty-five  cents  on 
the  promised  dollar,  at  the  Board  of  Brokers,  in  the  city  of  New 
York.  (History,  page  198.) 

Secretary  Chase  and  myself  differed  materially  in  regard  to  the 
points  herein  stated  in  managing  the  finances.  When  the  Finan¬ 
cial  History  of  the  War  was  published,  I  sent  him  a  copy,  and  re¬ 


ceived  from  him  the  following  reply  : 

“  Washington,  July  15,  1869. 

“  My  dear  sir:  This  morning  I  have  received  your  book  on  the  Finan¬ 
cial  History  of  the  War,  promised  in  your  letter,  which  came  several  days 
ago.  I  have  had  time  to  give  only  a  very  hasty  glance  at  the  contents.  You 
adhere ,  I  perceive ,  to  your  old  views  on  the  points  where  we  differed;  and  I  can- 


11 


not  say  I  have  changed  mine.  But  I  shall  read  your  connected  account  of 
what  transpired  both  while  and  since  I  was  Secretary  of  the  Treasury,  with 
attention  and  interest,  and  will  write  you  by-and-by  more  in  detail.  Mean¬ 
time,  I  remain  with  that  sincere  regard  and  respect,  which  your  abilities 
most  honorably  devoted  to  the  welfare  of  our  country  inspired  in  me. 

“  Faithfully  yours,  “  S.  P.  CHASE. 

“Hon.  E.  G.  Spaulding.” 

No  further  communication  was  ever  received  from  Mr.  Chase 
on  the  subject.  He  commenced  his  administration  of  the  Treas¬ 
ury  in  1861,  as  a  believer  in  hard  money,  and  a  firm  advocate  of 
the  Sub-Treasury  law,  and  without  much  practical  knowledge  of 
the  credit  machinery  by  which  the  great  financial  transactions  of 
the  country  are  carried  on.  Pie  left  the  office  with  twice  as  much 
inflating  paper  outstanding  as  ought  ever  to  have  been  issued,  and 
with  the  promised  dollar  printed  on  the  face  of  the  greenback 
worth  only  from  35  to  40  cents  in  gold. 

Plon.  Wm.  Pitt  Fessenden  was  appointed  Secretary  of  the 
Treasury  in  place  of  Mr.  Chase,  and  entered  upon  the  duties  of 
the  office  July  5,  1864,  and  continued  in  the  office  performing  the 
duties  very  acceptably  about  eight  months,  and  until  the  second 
inauguration  of  President  Lincoln,  March  4,  1865,  when  Mr. 
McCulloch  was  appointed  in  his  place. 

Secretary  McCulloch  was  one  of  best  practical  financiers  in  the 
country,  and  managed  the  Treasury  Department  with  marked  pru¬ 
dence  and  ability.  His  annual  reports  were  based  upon  correct 
principles,  and  were  very  clear  and  able  expositions  of  the  finan¬ 
cial  situation.  If  Congress  had  continued  to  give  him  proper 
support,  instead  of  repealing  the  law  for  retiring  greenbacks,  it  is 
my  firm  belief  that  he  would  have  conducted  us  back  to  the  spe¬ 
cie  standard  during  the  four  years  of  his  administration  of  the 
Treasury  Department,  and  without  materially  affecting,  in  an  un¬ 
favorable  manner,  the  legitimate  business  of  the  country.  The 
controlling  majority  in  Congress  was  weak  and  vacillating  in  its 
course,  and  utterly  failed  to  make  any  provision  for  redeeming 
the  greenback  currency. 

After  the  surrender  of  the  rebel  armies  to  Gen.  Grant  and  Gen. 
Sherman  the  volunteer  army  was  mustered  out  of  the  service,  and 
had  to  be  paid  in  full.  Secretary  McCulloch  obtained  the  means 
to  pay  them  chiefly  by  the  issue  of  1.30  treasury  notes.  The 
amount  required  for  that  purpose  was  very  large,  and  the  amount 
of  these  notes  outstanding  in  October,  1865,  was  $830,000,000, 


12 


which  were,  by  law,  expressly  fundable  within  three  years  into 
six  per  cent,  gold  bonds.  The  right  to  fund  them  was  not  abro¬ 
gated,  and  within  three  years  they  were  all  taken  off  the  market 
and  funded  in  those  bonds.  This  shows  conclusively  how  treasury 
notes  may  be  retired  from  circulation  by  an  efficient  system  of 
funding.  The  greenbacks  would  have  been  funded  in  the  same 
way  if  the  original  contract  for  funding  them  had  not  been 
abrogated. 

Upon  the  inauguration  of  President  Grant  on  the  fourth  of 
March,  1869,  Hon.  George  S.  Bout  well  was  made  Secretary  of  the 
Treasury,  and  entered  upon  the  duties  of  the  office  March  11. 
The  President,  in  his  inaugural  address,  expressed  himself  favora¬ 
ble  to  a  return  to  specie  payments  at  the  earliest  practicable  mo¬ 
ment,  and  in  his  annual  message,  he  said  in  reference  to  an  irre¬ 
deemable  currency,  “  It  is  an  evil  which  I  hope  will  receive  your 
most  earnest  attention.  It  is  a  duty,  and  one  of  the  highest 
duties  of  the  government  to  secure  to  the  citizen  a  medium  of 
exchange  of  fixed  and  unvarying  value.  This  implies  a  return  to 
a  specie  basis,  and  no  substitute  for  it  can  be  devised.  It  should 
he  commenced  now.  *  *  *  I  earnestly  recommend  to 

you  such  legislation  as  will  insure  a  gradual  return  to  specie  pay¬ 
ments,  and  put  an  immediate  stop  to  fluctuations  in  the  value  of 
the  currency.”  The  first  act  of  Congress  approved  by  President 
Grant  after  his  inauguration,  contained  an  express  promise  in 
these  words:  “The  United  States  solemnly  pledges  its  faith  to 
make  provision ,  at  the  earliest  practicable  period,  for  the  redemp¬ 
tion  of  the  United  States  notes  in  coin.” 

This  promise  on  the  part  of  Congress  to  make  provision  for  the 
redemption  of  the  greenback  currency  in  gold,  has  been  about  as 
badly  broken  as  was  the  promise  made  in  the  first  legal  tender 
act  February  25,  1862,  to  redeem  it  in  six  per  cent,  gold  bonds. 

It  is  true  that  by  the  acts  of  Congress  the  revenues  derive 
from  custom  duties  and  internal  taxes  were  ample,  in  1869,  to  pay 
the  annual  expenses  of  the  government  and  interest  on  the  public 
debt,  and  leave  a  surplus,  and  consequently  an  accumulation  of 
gold  in  the  treasury  which  would,  in  due  time,  have  been  an  am¬ 
ple  fund  “to  redeem  the  United  States  notes  in  coin”  in  accord¬ 
ance  with  the  above  promise. 

Here  commenced  the  third  mistake  on  the  pafrt  of  the  Treasury 
Department  in  the  management  of  the  finances.  Secretary  Bout- 


13 


well  did  not  regard  this  surplus  as  at  all  necessary  to  the  support 
of  the  credit  of  the  greenbacks,  or  as  a  reserve  by  which  they 
could  ultimately  be  redeemed  in  coin.  He  therefore  proceeded  to 
pay  off  and  take  up  the  bonded  debt  not  yet  due  for  ten  to  fifteen 
years,  leaving  the  past  due  greenbacks  (badly  broken  promises) 
still  in  the  slough  of  irredeemable  currency,  without  any  provision 
whatever  for  their  payment.  In  this  way  he  reduced  the  public 
debt  iucftiding  three  per  cent,  notes  about  $368,000,000  during  the 
four  years  of  his  administration,  but  did  not  redeem  any  of  the 
greenbacks,  or  keep  any  reserve  for  that  purpose. 

He  also  went  further  and  committed  an  act  which  I  have  always 
regarded  as  a  violation  of  the  spirit  and  intent  of  the  original 
legal  tender  act,  in  procuring  new  engraved  plates  to  be  made 
and  the  printing  and  paying  out  of  a  new  emission  of  legal  ten¬ 
der  notes  in  time  of  peace,  four  years  after  the  close  of  the  war, 
when  the  public  interests  did  not  require,  at  that  time,  any  such 
forced  loan  to  be  made.  The  clause  in  the  original  legal  tender 
act  in  regard  to  the  re-issue  of  the  greenback  currency  is  as  fol¬ 
lows:  “  Such  United  States  notes  shall  be  received  the  same  as  coin 
at  their  par  value  in  payment  of  any  loans  that  may  hereafter  be 
sold  or  negotiated  by  the  Secretary  of  the  Treasury,  and  may  be 
reissued  from  time  to  time  as  the  exigences  of  the  public  interests 
shall  require.”  (History  legal  tender  act,  p.  149.)  The  only 
ground  on  which,  by  any  possibility,  the  legal  tender  notes  could 
be  constitutionally  issued  was  that  it  afforded  a  means  by  wrhich 
the  war  powers  of  the  government  could  be  carried  into  full  effect 
in  the  prosecution  of  the  war.  But  four  years  after  the  close  of 
the  war,  it  was  not  constitutional  to  reissue  them,  and  it  was  very 
clear  that  no  legitimate  “public  interest”  required  that  this  new 
emission  should  be  reissued.  On  the  contrary,  it  was  manifestly 
for  the  “public  interest  ”  that  as  fast  as  these  notes  were  returned 
to  the  treasury  they  should  be  held  there,  or  cancelled,  until  the 
balance  outstanding  were  on  a  par  with  gold.  The  forcing  into 
circulation  of  a  new  emission  of  broken  promises  so  long  after 
the  close  of  the  war  was  not  only  a  violation  of  the  constitution, 
but  was  manifestly  contrary  to  the  spirit  and  intent  of  the  legal 
tender  act  as  originally  passed.  Secretary  Boutwell’s  policy  of 
using  his  surplus  revenues  to  pay  off  a  funded  debt  not  due,  in¬ 
stead  of  redeeming  the  broken  and  past  due  promises,  was  based 
on  the  fallacious  idea  put  forth  by  him  on  many  occasions  that 


14 


the  country  would  “grow  up”  to  the  situation,  and  that  the 
greenback  currency  would  ultimately  all  appreciate  to  par  with 
gold  by  the  increased  population,  and  the  enlarged  demands  of  the 
business  of  the  country  without  making  provision  for  redeeming  it. 

Hon.  William  A.  Richardson  succeeded  Mr.  Boutwell  as  Secre¬ 
tary  of  the  Treasury,  on  the  seventeenth  day  of  March,  1873. 
He  was  assistant  Secretary  under  Mr.  Boutwell,  and  upon  assum¬ 
ing  the  duties  of  Secretary  continued  the  same  mistaken  policy  in 
regard  to  the  finances  which  had  been  carried  out  by  his  prede¬ 
cessor.  Both  of  them  went  so  far  as  to  claim  that  the  greenbacks 
withdrawn  from  circulation  during  Mr.  McCulloch’s  administra¬ 
tion  of  the  treasury,  were  still  a  reserve ,  and  that  they  had  a  right 
to  reissue  them  in  case  of  an  emergency.  During  the  great  finan¬ 
cial  panic  which  occurred  in  the  fall  of  1873,  and  with  a  view  to 
stop  it,  Secretary  Richardson  did  actually  reissue  and  pay  out  in 
the  purchase  of  bonds,  not  due,  thetsum  of  $26,000,000  of  green¬ 
backs,  which  Mr.  McCulloch  in  a  recent  letter  says,  “  was  as  pow¬ 
erless  to  stop  the  panic  as  bread  pills  would  be  to  check  the 
progress  of  the  cholera  or  yellow  fever.” 

The  general  •  policy  of  both  Mr.  Boutwell  and  Mr.  Richardson 
was,  to  pay  a  debt  not  due,  and  leave  neglected  and  unpaid  the 
broken  promises  of  the  government,  which  had  remained  unpaid 
for  several  years.  During  their  administration  of  the  treasury 
the  amount  of  greenbacks  outstanding  was  increased  from 
$356,000,000  to  $382,000,000.  Subsequently  Congress,  by  act  of 
June  20,  1874,  fixed  that  sum  as  the  maximum  amount  of  the 
greenback  currency,  “  and  that  no  part  thereof  should  be  used  as 
a  reserve,”  which  effectually  cut  off  the  pretense  that  the  pre¬ 
viously  redeemed  greenbacks  were  a  reserve  to  be  used  by  the 
Secretary  of  the  Treasury  at  his  discretion.  Thus  leaving  the 
greenback  currency  $26,000,000  more  in  1874  than  it  was  in  1869, 
when  Mr.  Boutwell  became  Secretary  of  the  Treasury. 

The  Supreme  Court  of  the  United  States,  in  the  case  of  Lane 
County  vs.  The  State  of  Oregon,  decided,  that  the  greenback  cur¬ 
rency  was  not  a  legal  tender  in  the  payment  of  taxes  levied  by 
that  State.  7  Wallace  R.,  71.  Also  in  the  case  of  Bronsen  vs. 
Rhodes,  7  Wallace,  229,  that  where  the  contract  in  express  terms  is 
payable  in  gold  coin  of  the  United  States  it  cannot  be  satisfied  by 
a  tender  of  the  greenback  currency.  These  two  cases  are  re¬ 
garded  as  good  law,  and  have  not  been  overruled. 


15 


In  the  case  of  Hepburn  vs.  Griswold,  8  Wallace,  604,  the  Court 
(opinion  of  Chief  Justice  Chase),  decided  that  a  contract  made 
payable  in  dollars  before  the  passage  of  the  legal  tender  act,  could 
not  be  satisfied  by  a  tender  of  greenbacks;  that  such  act,  so  far 
as  it  applied  to  debts  contracted  before  its  passage,  is  unconstitu¬ 
tional. 

Hon.  J.  W.  Wallace,  the  official  reporter  of  the  United  States 
Supreme  Court,  in  a  letter  written  by  him  March  9,  1770,  says 
of  this  decision,  “that  notes  of  the  United  States  when  tendeied 
in  payment  of  a  contract  made  previously  to  the  passage  of  the 
legal  tender  act  of  February,  1862,  was  no  lawful  tender,  was  con¬ 
curred  in  by  five  judges,  not  by  three  as  assumed  in  the  paragraph 
quoted.  These  five  judges  were  the  Chief  Justice,  and  Justices 
Nelson,  Grier,  Clifford  and  Field.  Judge  Grier  had  left  the  bench 
before  the  opinions  were  delivered ,  but  he  was  on  it  when  the  case 
was  argued  in  conference;  and  when  the  judgment  of  affirmance 
of  the  Court  of  Appeals  of  Kentucky  which  had  decided  the  ten¬ 
der  bad,  was  irrevocably  and  perfectly  agreed  upon.” 

Subsequent  to  the  decision  in  the  above  case  of  Hepburn  vs. 
Griswold,  the  Supreme  Court  was  filled  up  by  the  appointment  of 
new  judges,  and  consisted  of  nine  judges — Chief  Justice  Chase 
and  Associate  Justices  Nelson,  Clifford,  S wayne,  Miller,  Davis, 
Field,  Strong  and  Bradley.  This  court  thus  constituted  decided 
to  hear  a  full  argument  on  all  the  points  raised  in  the  cases  of 
Knox  vs.  Lee,  and  Barker  vs.  Davis.  The  argument  was  heard  at 
the  December  Term,  1870. 

The  court,  after  mature  deliberation,  decided,  five  to  four,  that 
a  tender  of  United  States  notes  on  debts  contracted  previous  to 
the  passage  of  the  legal  tender  act,  February  25,  1862,  was  a 
valid  tender  in  payment  of  such  debts,  thereby  overruling  the 
previous  decision  of  the  court  in  the  case  of  Hepburn  vs.  Gris¬ 
wold. 

Mr.  Justice  Strong  delivered  the  opinion  of  the  majority  of 
the  court,  and  Mr.  Justice  Bradley  read  an  opinion  on  the  same 
side.  On  the  other  side  of  the  question  very  elaborate  opinions 
were  read  by  Chief  Justice  Chase  and  Justices  Clifford  and  Field, 
all  of  which  are  published  in  12  Wallace  Reports,  457. 

Hon.  Reverdy  Johnson,  in  a  recent  communication  reviewing 
this  case,  comes  to  the  conclusion  that  Justice  Strong  did  not  in¬ 
tend  to  go  so  far  as  to  decide  that  such  an  act  would  be  constitu- 


1G 


tional  if  passed  in  time  of  peace.  In  that  part  of  the  opinion 
which  appears  at  page  540  (12  Wallace),  Justice  Strong  says  the 
inquiry  is  whether  such  laws  “  were,  when  enacted ,  appropriate 
instrumentalities  for  carrying  into  effect  or  executing  any  of  the 
known  powers  of  Congress,  or  of  any  department  of  the  govern¬ 
ment.  Plainly  to  this  inquiry,  a  consideration  to  the  time  when 
they  were  enacted ,  and  ©f  the  circumstances  in  which  the  govern¬ 
ment  then  stood  is  important.”  He  then  states,  in  glowing  hut 
not  exaggerated  terms,  what  was  the  overwhelming  necessity  for 
the  passage  of  the  legal  tender  act  in  February,  18(52,  and  adds 
“it  is  not  to  be  denied  that  acts  may  be  adapted  to  the  exercise 
of  lawful  power,  and  appropriate  to  it  in  seasons  of  exigency 
which  would  be  inappropriate  at  other  times.”  Judge  Bradley, 
the  other  new  member,  expressed  the  same  idea  of  necessity  even 
more  emphatically.  Said  he:  “It  follows  as  another  corollary 
from  the  views  which  I  have  expressed,  that  the  power  to  make 
treasury  notes  a  legal  tender,  whilst  a  mere  incidental  one  to  that 
of  issuing  the  notes  themselves,  and  to  one  of  the  forms  of  bor¬ 
rowing  money,  is  nevertheless  a  power  not  to  he  resorted  to  except 
on  extraordinary  and  pressing  occasions,  such  as  war  or  dther  pub¬ 
lic  exigencies  of  great  gravity  and  importance  /  and  should  be  no 
longer  continued  than  all  the  circumsta?ices  of  the  case  demand 
This  very  plainly  indicates  that  the  majority  of  the  court  would 
not  have  decided  the  legal  tender  act  constitutional  if  it  had 
been  passed  while  the  government  was  on  a  peace  footing. 

LETTER  FROM  JUSTICE  STRONG  OF  THE  U.  S.  SUPREME 

COURT,  IN  FAVOR  OF  RETURNING  TO  OUR  NORMAL  CONDI¬ 
TION. 

“  Philadelphia,  March  8,  1870. 

“  Hon.  E.  G.  Spattlding:  My  Dear  Sir:  I  received  a  short  time  since 
through  your  politeness,  a  copy  of  your  ‘Financial  History  of  the  War.’  I 
have  not  hitherto  acknowledged  the  receipt,  and  returned  the  thanks  1  owe, 
because  I  wished  first  to  read  the  book,  and  my  engagementshave  been  such  of 
late,  that  I  could  not  find  the  necessary  time.  I  have  now  read  it,  and  have 
been  both  instructed  and  interested.  The  financial  history  of  the  countiy 
during  the  war  is  quite  as  remarkable  as  the  war  itself,  and  I  am  glad  you 
have  spread  it  before  the  public  so  intelligently.  There  were  doubtless  some 
mistakes,  but  it  is  wonderful  that  there  were  no  more,  and  no  greater.  Now 
if  we  can  soon  return  to  our  normal  condition,  the  scars  of  the  war  will  soon  be 
o  bliterated ,  and  we  shall  have  remaining  only  the  blessings  achieved. 

“I  should  be  glad  to  discuss  with  you  some  subjects  brought  forward  in 
your  book,  but  I  have  not  now  the  time,  I  can  only  say  that  your  book, 


17 


as  a  whole,  is,  in  my  opinion  very  valuable,  and  that  you  deserve  the  grati¬ 
tude  of  the  country  not  only  for  your  history,  but  for  the  part  you  acted 
during  the  war  in  sustaining  the  power  of  the  government, 

I  am,  yours  truly, 

W.  STRONG. 


If  a  tender  of  the  new  emission  of  greenbacks  put  out  by  Secre¬ 
tary  Boutwell  in  1869-70,  should  be  made  on  an  existing  contract, 
it  is  doubtful  whether  such  tender  would  be  valid,  because,  four 
or  five  years  after  the  close  of  the  war,  there  did  not  exist  any 
public  necessity  for  such  a  forced  loan.  The  revenues  were  then 
ample  to  pay  all  expenses  and  leave  a  surplus,  which,  under  a  mis¬ 
taken  policy  was  used  to  w^fupd  the  public  debt,  leaving  the  over 
due  debt  unpaid. 


LETTER  FROM  ATTORNEY-GENERAL  HOAR  ON  THE  FINANCES. 


Hon.  E.  G.  Spaulding: 


Washington,  Oct.  15,  1869. 


My  Dear  Sir: —  I  have  the  honor  to  acknowledge  the  receipt  of  your 
letter  of  the  6th  inst.,  and  with  it  a  copy  of  your  Financial  History  of  the 
War,  for  which  I  desire  to  return  my  thanks. 

The  constant  pressure  upon  my  time  has  prevented  me  from  giving  the 
book  more  than  a  cursory  inspection,  but  it  seems  to  be  a  valuable  acquisi¬ 
tion  to  our  financial  history,  and  throws  considerable  light  upon  the  impor¬ 
tant  question  pf  a  return  to  specie  payments.  I  am  one  of  those  who  believed 
that  it  was  for  the  interest  as  well  as  the  duty  of  the  nation  to  return  at  once 
to  the  true  and  solid  standard  of  value  as  soon  as  active  hostilities  had  ceased; 
that  we  should  have  treated  the  currency  as  we  did  our  armies — regarding  the 
VOLUNTEERS  AND  THE  GREENBACKS  ALIKE  AS  NECESSITIES  OP  WAR,  TO  BE 
DISPENSED  WITH  AS  FAST  AS  POSSIBLE  ON  THE  RETURN  OP  PEACE.  I  think 

we  made -a  great  mistake  in.  not doing  so;  that  the  shortest  method  was  the 
shortest  and  best;  that  the  only  way  to  reach  the  object  is  by  a  steady  and 
persistent  contraction  of  the  currency-a  painful  process  whenever  it 
comes,  n,  doubt,  but  harder  and  worse  for  us  the  longer  it  is  delayed. 

I  hope  that  Congress  will  address  itself  with  courage  and  constancy  to  the 
solution  of  the  problem  as  soon  as  it  meets  ;  and  will  feel  assured  that  the 
American  people  have  intelligence  enough  to  support  those  who  do  it.  My 
views  on  the  subject  are  of  little  importance  to  anybody,  but,  as  an  American 
citizen,  I  should  be  sorry  and  ashamed  to  find  my  country  unable  and  unwill¬ 
ing,  in  a  time  of  peace  and  prosperity,  to  provide  for  its  over-due  paper. 

Very  respectfully, 

.  E.  R.  HOAR, 

PRESIDENT  GRANT’S  VETO. 

In  1874,  Congress  passed  an  inflation  act  authorising  a 
large  increase  of  the  greenback  currency  and  containing  other 


mischievous  provisions.  This  act  was  submitted  to  President 
Grant,  and  extraordinary  efforts  made  by  the  inflationists  in  and 
out  of  Congress,  to  have  him  approve  it.  He  refused  to  do  so, 
and  on  the  22d  of  April  vetoed  the  act  in  a  message  to  the 
Senate  condemning  this  measure  of  inflation  in  unqualified  terms. 
He  says  “the  theory,  in  my  belief,  is  a  departure  from  the  true 
principles  of  finance,  national  interest,  national  obligation  to 
creditors,  congressional  promises,  party  pledges  by  both  political 
parties,  and  of  the  personal  views  and  promises  made  by  me  in 
every  annual  message  sent  to  Congress  and  in  each  inaugural 
address.”  This  veto  is  regarded  as  one  of  the  most  important  and 
useful  acts  of  President  Grant’s  administration.  It  had  an 
important  influence  in  checking  the  clamor  for  more  irredeemable 
currency. 

Secretary  Richardson,  after  holding  the  office  about  fourteen 
months  and  a  half,  resigned,  and  on  the  4th  of  June,  1874,  Hon. 
Benjamin  H.  Bristow  was  appointed  Secretary  of  the  Treasury, 
and  entered  upon  the  duties  of  the  office. 

ASSORTING  HOUSE. 

In  pursuance  of  the  provisions  of  the  act  of  Congress  passed 
June  20,  1874,  an  Assorting  Bureau  has  been  established  in’the 
Treasury  Department  for  the  redemption  of  National  Bank  cur¬ 
rency.  This  assorting  and  redeeming  process  serves  a  very  useful 
purpose  in  taking  out  of  circulation  all  the  worn,  dirty,  mutilated 
and  defaced  notes,  and  replacing  them  with  clean  ones.  All  this 
is  done  in  a  satisfactory  manner,  and  by  an  equitable  assessment, 
the  Banks  pay  all  the  expenses  of  this  Assorting  Bureau  ;  but  in 
so  far  as  it  seeks  to  be  an  efficient  redemption  of  the  National 
Bank  notes,  it  utterly  fails  to  give  that  vitality  and  elasticity 
which  ought  to  attach  to  a  commercial  currency.  The  greenbacks 
and  National  Bank  notes  circulate  on  a  par  with  each  other,  and 
each  kind  of  notes  possess  about  the  same  purchasing  power. 
Both  kinds  are  worth  about  85  cents  on  the  promised  dollar.  The 
consequence  is  that  there  has  not  been,  and  there  cannot  be,  any 
efficient  redemption  of  bank'notes  in  the  present  condition  of  the 
currency,  because  there  is  neither  object  nor  motive  to  prompt  it.  I 
This,  so  called,  redemption  simply  resolves  itself  into  the  swapping 
one  kind  of  irredeemable  paper  for  another  kind  of  no  higher 
value.  But,  inasmuch  as  it  renovates  the  paper  circulation, 


19 


whether  we  call  it  redemption,  or  a  process  by  which  clean  notes 
are  furnished,  is  not  material.  This  redemption  bureau  will, 
however,  become  very  important  as  soon  as  there  is  a  general 
resumption  of  specie  payments. 

PRESIDENT  GRANT’S  PLAN. 

On  the  24th  of  June,  1874,  President  Grant  published  his  fur¬ 
ther  views  in  regard  to  resuming  specie  payments : 

“First — I  would  like  to  see  the  legal-tender  clause,  so-called, 
repealed,  the  repeal  to  take  effect  at  some  future  time,  say  J uly 
1,  1875.  This  would  cause  all  contracts  made  after  that  date,  for 
wages,  sales,  &c.,  to  be  estimated  in  coin.  It  would  correct  our 
notion  of  values.  The  specie  dollar  would  be  the  only  dollar 
known  as  the  measure  of  equivalents.  When  debts  afterwards 
contracted  were  paid  in  currency,  instead  of  calling  the  paper 
dollar  and  quoting  gold  at  20  per  cent,  premium,  we  should  think 
and  speak  of  paper  at  so  much  discount.  This  alone  would  aid 
greatly  in  bringing  the  two  currencies  nearer  together  at  par. 

Second — I  would  like  to  see  a  provision  that  at  a  fixed  day,  say 
July  1,  1876,  the  currency  issued  by  the  United  States  should  be 
redeemed  in  coin  on  presentation  to  any  Assistant  Treasurer,  and 
that  all  the  currency  so  redeemed  should  be  cancelled  and  never 
reissued.  To  effect  this  it  would  be  necessary  to  authorize  the 
issue  of  bonds,  payable  in  gold,  bearing  such  interest  as  would 
command  par  in  gold,  to  be  put  out  by  the  Treasury  only  in  such 
sums  as  should  from  time  to  time  be  needed  for  the  purpose  of 
redemption.  Such  legislation  would  insure  a  return  to  sound 
financial  principles  within  two  years,  and  would  in  my  judgment, 
work  less  hardship  to  the  debtor  interest  than  is  likely  to  come 
from  putting  off  the  day  of  final  reckoning.  It  musk  be  borne  in 
mind,  too,  that  the  creditor  interest  had  its  day  of  disadvantage 
also,  when  our  present  financial  system  was  brought  in  by  the 
supreme  needs  of  the  nation  at  the  time.  *  *  *  * 

ECONOMY  AND  TAXATION. 

“Again,  I  would  provide  an  excess  of  revenue  over  current 
expenditures.  I  would  do  this  by  rigid  economy  and  by  taxation, 
where  taxation  can  best  be  borne.  Increased  revenue  would  work 
a  reduction  of  debt  and  interest,  and  would  provide  coin  to  meet 
demands  on  the  Treasury  for  the  redemption  of  its  notes,  thereby 
diminishing  the  amount  of  bonds  needed  for  that  purpose.  All 


20 


taxes  after  redemption  begins  should  be  paid  in.  coin  or  United 
States  notes.  This  would  force  redemption  on  the  national  banks. 
With  measures  like  these,  or  measures  which  would  work  out  such 
results,  I  see  no  danger  in  authorizing  free  banking  without  limit.” 

CONGRESSIONAL  PLAN  OF  RESUMING  SPECIE  PAYMENTS. 

.Senator  Sherman,  who  was  the  most  efficient  member  in  procur¬ 
ing  the  original  legal  tender  act  to  be  passed  through  the  Senate 
in  1862,  introduced  into  the  Senate  at  the  last  session  of  Congress, 
“An  act  to  provide  for  the  resumption  of  specie  payments.”  This 
bill  after  being  very  fully  discussed  and  criticised  in  the  Senate 
and  House,  was  passed  and  approved  by  the  President,  January 
14,  1875. 

The  first  section  requires  the  Secretary  of  the  Treasury,  as 
rapidly  as  practicable,  to  cause  to  'be  coined  at  the  mints  of 
the  United  States,  silver  coins  of  the  usual  denominations,  above 
five  cents,  and  redeem  all  the  fractional  currency  of  similar 
denominations  outstanding,  amounting  to  about  $40,000,000. 

The  third  section  removes  the  monopoly  feature  of  the  Bank 
act,  and  allows  free  banking  in  all  parts  of  the  United  States. 
Whenever  bank  notes  are  issued  for  circulation  under  this  new 
law,  eighty  per  cent,  of  greenbacks  are  to  be  redeemed  by  the 
Secretary  of  the  Treasury,  for  all  the  new  bank  notes  issued,  and 
he  is  to  continue  such  redemption  pari  pasu  with  new  issue 
of  bank  notes,  until  there  shall  be  outstanding  $300,000,000  of 
greenbacks,  and  no  more.  And  on  and  after  January  1,  1879,  the 
Secretary  of  the  Treasury  shall  redeem  the  greenbacks  in  coin, 
and  to  enable  him  to  “ prepare  and  provide  for  the  redemption 
authorized  or  required  in  this  act,  he  is  authorized  to  use  any  sur¬ 
plus  revenues  from  time  to  time  in  the  Treasury  not  otherwise 
appropriated,  and  to  issue,  sell  and  dispose  of, \  at  not  less  than  par, 
in  coin,  either  of  the  description  of  bonds  of  the  United  States, 
described  in  the  act  of  Congress  approved  July  14,  1870,  entitled 
‘  An  act  authorizing  the  refunding  of  the  national  debt,’  with  like 
qualities,  privileges,  and  exemptions,  to  the  extent  necessary  to 
carry  this  act  into  effect,  and  to  use  the  proceeds  thereof  for  the 
purpose  aforesaid,  and  all  the  provisions  of  the  law  inconsistent 
with  this  act  are  hereby  repealed.” 

This  act  for  the  resumption  of  specie  payments  is  quite  man¬ 
datory  in  its  terms,  and  if  Congress  is  not  weak  and  vacilating 


21 


enough  to  repeal  or  modify  the  law,  and  the  yearly  revenues  are 
kept  up  to  a  proper  amount,  it  will  prove  to  be  much  more  effec¬ 
tive  to  bring  about  resumption  than  is  generally  supposed.  The 
first  section  of  the  act  “  authorizes  and  requires”  the  Secretary  of 
the  Treasury  to  have  enough  silver  coins  struck  at  the  mints  to 
redeem  all  the  fractional  currency  now  outstanding,  and  Secretary 
Bristow,  in  obedience  to  the  requirements  of  the  act,  is  now  coin¬ 
ing  the  silver  at  the  mints,  as  fast  as  possible,  with  a  view  to  call¬ 
ing  in  all  the  fractional  currency  and  have  it  replaced  by  the 
small  silver  coins  like  those  in  common  use  before  the  war.  This 
will  not  be  contraction,  for  the  reason  that  the  silver  will  take  the 
place  of  paper. 

The  third  section  of  the  act  is  equally  mandatory  in  requiring 
the  Secretary  to  redeem  all  the  greenback  currency,  in  gold  coin, 
on  and  after  January  1,  1879.  Preliminary  to  this  important 
step,  it  is  provided  as  before  stated,  that  under  the  free  banking 
feature  of  the  law,  for  every  $100  of  bank  notes  issued,  $80  of 
greenbacks  shall  be  withdrawn  from  circulation.  In  this  way  it 
is  believed  that  there  will  be  quite  a  large  reduction  of  greenbacks 
before  January  1,  1879,  and  possibly  it  may  be  reduced  to  $300,- 
000,000,  which  is  the  maximum  amount  fixed  by  the  act  for  the 
legal  tender  circulation.  This  amount,  and  whatever  amount 
above  that  sum  is  outstanding  on  the  first  of  January,  1879,  is  to  be 
redeemed  in  gold  on  demand,  when  presented  in  sums  of  $50,  and 
upwards.  The  object  of  the  act  is,  by  continued  redemption  in 
gold  coin,  to  circulate  $300,000,000  greenback!'  on  a  par  with 
gold.  Can  this  be  done  under  the  provision  of  the  act  ?  If  it  can 
be  done  it  will  cause  a  general  resumption  of  specie  payments  by 
the  banks  and  people  in  all  their  business  transactions.  All  busi¬ 
ness  will  then  be  done  on  a  gold  basis,  and  laborers  and  operatives 
will  be  paid  in  gold  and  silver,  or  its  equivalent,  and  not  in  an 
irredeemable  and  depreciated  paper  currency. 

What  are  the  means  provided  by  the  act  to  enable  the  Secretary 
to  resume  specie  payments  at  the  time  specified  ?  All  the  neces¬ 
sary  5  per  cent,  gold  bonds  which  can  be  disposed  of  at  par  for 
coin,  are  authorized  by  the  act,  and  placed  at  the  disposal  of  the 
Secretary.  These  bonds  are  now  at  par  and  above,  and  if  they 
continue  so  to  January  1,  1879,  the  Secretary  will,  if  the  revenues 
are  kept  up,  have  ample  provision  made  for  redeeming  the  green¬ 
backs  in  gold  coin  at  that  time.  If  gold  coin  is  paid  out  for 


22 


greenbacks,  the  gold  will  take  the  place  of  greenbacks  in  the  bank¬ 
ing  and  business  operations  of  the  country,  so  that  there  will  be 
only  such  contraction  as  is  necessary  to  the  stability  of  legitimate 
business.  If  a  suitable  gold  reserve  is  retained  in  the  Treasury 
against  the  greenbacks  in  circulation,  there  will  be  no  loss  of 
interest,  because  neither  the  gold  nor  the  greenbacks  bear  any 
interest. 

What  is  most  to  be  feared  is,  that  Congress  will  repeal  the  act, 
or  so  modify  it  as  to  prevent  resumption  at  the  time  specified. 
With  the  known  and  expressed  views  of  President  Grant  he  would 
no  doubt,  veto  any  bill  of  that  kind  which  may  be  passed  during 
his  term  of  office.  The  law  will  probably  continue  in  force  until 
1877,  and  it  is  possible  that  further  provision  may  be  made  to  aid 
in  causing  resumption  to  take  place  January  1,  1879.  But  if  only 
the  present  law  remains  on  the  statute  book  to  that  time,  it  will 
be  found  to  be  more  efficient  than  is  generally  supposed,  in  bring¬ 
ing  about  the  desired  result,  especially  if  the  5  per  cent,  gold 
bonds  continue  to  sell  at  par  for  gold. 

It  is  the  general  impression  that  the  act  ought  to  have  author¬ 
ized  more  extended  preparation  for  resumption,  and  I  am  free  to 
say  that  I  have  shared  this  feeling.  If,  however  Congress  gives 
proper  support  to  the  measure,  by  keeping  up  the  revenues,  it  is 
by  no  means  certain  that  the  Secretary  by  a  judicious  administra¬ 
tion  of  the  act,  will  not  be  able  to  resume  specie  payments  by 
Jannary  1,  1879.  The  Treasury  must  be  well  supplied  with  gold, 
and  an  ample  yearly  revenue  provided,  in  order  to  resume  and 
maintain  such  resumption.  If  the  reserve  of  gold  is  made  ample, 
resumption  will  be  easy.  The  greenbacks  not  having  been  issued 
upon  commercial  values,  but  for  the  waste  of  war,  will  require 
extraordinary  support  in  order  to  maintain  specie  payments.  At 
present  there  is  too  great  a  disparity  between  the  reserve  of  gold 
in  the  Treasury  and  the  amount  of  greenbacks  to  be  redeemed. 
Whether  resumption  takes  place  in  three,  five  or  ten  years,  a 
larger  reserve  of  gold  will  be  necessary,  or  the  greenbacks  must 
be  reduced.  It  is  perfectly  plain  to  every  practical  business  man, 
that  the  greenback  currency  cannot  be  redeemed  in  coin  until 
the  Government  is  able  to  let  coin  flow  into  business  channels  and 
again  circulate  as  money ,  the  same  as  it  did  previous  to  the  war. 
Coined  money  must  resume  its  place  in  the  business  of  the  coun¬ 
try  simultaneously  with  the  withdrawal  of  the  greenbacks,  so  that 


23 


there  shall  be  no  material  disturbance  to  legitimate  business,  when 
resumption  takes  place.  This  can  be  accomplished  if  there  is  a 
continued  surplus  of  gold  received  into  the  Treasury  and  retained 
there  as  a  reserve  against  the  greenback  currency.  Every  one 
hundred  dollars  se’t  apart  as  a  reserve  against  an  equal  amount  of 
greenbacks,  would  be  a  practical  payment  of  them,  and  as  neither 
bears  interest  there  would  be  no  loss  of  interest.  Every  gold 
broker  knows  perfectly  well  that  there  can  be  no  successful 
resumption  until  there  is  a  much  larger  reserve  of  coin,  and  he 
accordingly  asks  $1.16  cents  in  greenbacks  for  a  dollar  in  gold, 
but  let  him  know  that  the  Government  holds  an  adequate  reserve 
fund  against  the  greenback  currency,  and  the  National  Banks  a 
like  fund,  the  appreciation  of  greenbacks  would  be  such  that  his 
occupation  as  a  gold  broker  would  be  nearly  gone,  even  if  the 
gold  did  not  pass  out  of  the  Treasury.  This  large  reserve  would 
be  tangible  evidence  to  him  that  the  Government  was  master  of 
the  situation. 

THE  GOLD  STANDARD. 

When  the  business  of  the  country  is  carried  on  upon  a  gold 
basis,  and  resumption  is  continued  as  an  accomplished  fact,  all  the 
greenbacks  and  National  Bank  notes  which  cannot  be  kept  per¬ 
manently  on  a  par  with  gold,  will  necessarily  have  been  retired 
from  circulation,  and  either  cancelled  or  held  in  the  sub-treasury, 
or  vaults  of  the  banks.  This  surplus  of  paper  currency,  which  is 
no  doubt  largely  in  excess  of  the  requirements  of  legitimate  busi¬ 
ness,  ought  to  be  cancelled  and  permanently  kept  out  of  circula¬ 
tion,  so  as  not  to  hazard  a  continuance  of  specie  payments. 

A  constitutional  standard  of  value  having  been  thus  established, 
the  Government,  desiring  to  return  to  its  legitimate  function  of 
coining  money  and  regulating  its  value,  will  ultimately  wish  to 
ri-d  itself  of  the  trouble  and  risk  incident  to  the  issuing  a  paper 
currency  and  redeeming  it  in  gold,  and  will  finally  repeal  the 
legal  tender  act.  This  will  leave  the  business  of  free  banking 
where  it  belongs,  open  to  all  its  citizens,  to  be  carried  on  upon  a 
gold  basis,  under  proper  legislative  provisions.  It  would  prob¬ 
ably  be  better  for  all  concerned  if  the  legal  tender  act  should  be 
repealed  at  an  earlier  day,  and  at  the  same  time  provide  for  retir¬ 
ing  the  greenbacks  by  the  issue  of  five  or  six  per  cent,  compound 
interest  notes,  fundable  in  two  and  three  years  into  a  five  per 
cent,  ten  years  gold  bonds.  But  the  present  resumption  act  has 


24 


not  been  passed  with  that  object  in  view,  and  for  the  present  it 
will  be  best  to  support  the  law  as  it  now  stands,  and  if  possible, 
add  to  its  efficiency  by  further  legislative  provisions.  The  banks 
should  be  required  to  retain  half  the  gold  interest  received  on  the 
bonds  deposited  as  security  for  their  circulating  notes  as  a  part  of 
their  reserve,  preparatory  to  resumption,  January  1,  1879. 

NEW  YORK  TO  RESUME  JANUARY  1,  1879. 

The  State  of  New  York  at  the  last  session  of  the  legislature, 
passed  a  law,  Chap.  73,  which  was  approved  by  Gov.  Tilden,  March 
22, 1875,  “To  establish  specie  payments  on  all  contracts  or  obliga¬ 
tions  payable  in  this  state  after  January  1,  1879.”  This  law  was 
passed  in  pursuance  of  the  principles  laid  down  in  the  case  of 
Lane  County  vs.  the  State  of  Oregon,  7  Wallace  R.  71,  that  the 
greenbacks  are  not  a  lawful  tender  in  payment  of  taxes  im-posed 
by  state  legislation  The  text  of  this  N.  Y.  law  is  as  follows  : 

“Section  1.  All  taxes  levied  and  confirmed  in  this  State  on  and 
after  January  first,  eighteen  hundred  and  seventy-nine,  shall  be 
collected  in  gold,  United  States  gold  certificates  or  National  bank 
notes  which  are  redeemable  in  gold  on  demand. 

2.  Every  contract  or  obligation  made  or  implied  after  January 
first,  eighteen  hundred  and  seventy-nine,  and  payable  in  dollars, 
but  not  in  a  specified  kind  of  dollars,  shall  be  payable  in  United 
States  coin  of  the  standard  of  weight  and  fineness  established  by 
the  laws  of  the  United  States  at  the  time  the  contract  or  obliga¬ 
tion  shall  have  been  made  or  implied.” 

This  completes  the  statement  of  the  measures  now  in  force  for 
resuming  specie  payments,  which  is  the  most  important  question 
now  before  the  country. 

TREASURY  SALES  OF  GOLD. 

The  Treasury  sales  of  gold  at  16  per  cent,  premium,  and  the 
receipt  of  greenbacks  in  payment,  and  the  immediate  reissue  of 
such  depreciated  greenbacks,  at  par,  t©  pay  the  civil  expenses  of 
the  Government,  ten  years  after  the  close  of  the  war,  is  an  anom¬ 
aly  in  any  solvent  government,  and  plainly  shows  the  weakness 
and  incompetency  of  Congress  in  not  providing  ample  revenues 
to  carry  on  the  government  in  time  of  peace  without  resorting  to 
any  such  discreditable  means.  The  gold  revenue  is  sufficient  to 
keep  up  the  sinking  fund  and  pay  the  gold  interest,  but  the  cur¬ 
rency  revenues  seem  to  be  inadequate  for  ordinary  expenses. 


25 


It  is  generally  understood  that  Secretary  Bristow  continues  his 
monthly  sales  of  gold,  (which  ought  to  be  husbanded  for  resump¬ 
tion  in  1879,)  to  raise  the  money  to  pay  the  current  expenses  of 
the  Government,  because  Congress  has  failed  to  provide  suffi¬ 
cient  means  to  carry  on  the  Government  in  any  other  way.  It 
is  also  generally  understood  that  Secretary  Bristow  would  not 
resort  to  this  monthly  “make-shift”  of  keeping  these  broken  legal 
tender  promises  in  circulation,  if  Congress  provided  the  means 
of  administrating  the  government  in  the  old  fashioned,  honest 
way.  Every  reissue  of  these  broken  promises,  backed  by  the 
legal  tender  provision,  is  a  forced  loan  in  time  of  peace,  and  is 
plainly  in  violation  of  the  constitution. 

These  sales  of  gold  at  this  time,  when  the  act  for  the  resump¬ 
tion  of  specie  payments  in  1879,  is  in  full  force,  is  not  a  good  indi¬ 
cation  for  resumption  at  that  time.  More  revenue  will  be  neces¬ 
sary,  and  it  remains  to  be  seen  whether  it  will  be  provided  to  aid 
in  carrying  this  very  important  measure  into  effect. 

Secretary  Bristow  is  believed  to  be  sound  on  the  main  question. 
In  his  first  annual  report  in  December,  1874,  he  very  clearly  sets 
forth  the  evils  of  an  irredeemable  paper  currency  as  follows: 

“  The  history  of  the  irredeemable  paper  currency  repeats  itself 
whenever  and  wherever  it  is  used.  It  increases  present  prices, 
deludes  the  laborer  with  the  idea  that  he  is  getting  higher  wages 
and  brings  a  fictitious  prosperity  from  which  follow  inflation  of 
business  and  credit  and  excess  of  enterprise  in  ever  increasing 
ratio,  until  it  is  discovered  that  trade  and  commerce  have  become 
fatally  diseased,  when  confidence  is  destroyed,  and  then  comes  the 
shock  to  credit,  followed  by  disaster  and  depression,  and  a  demand 
for  relief  by  further  issues.  The  universal  use  of,  and  reliance 
upon,  such  a  currency  tends  to  blunt  the  moral  sense  and  impair 
the  natural  self-dependence  of  the  people,  and  trains  them  to  the 
belief  that  the  Government  must  directly  assist  their  individual 
fortunes  and  business,  help  them  in  their  personal  affairs,  and  en¬ 
able  them  to  discharge  their  debts  by  partial  payment.  This 
inconvertible  paper  currency  begets  the  delusion  that  the  remedy 
for  private  pecuniary  distress  is  in  legislative  measures,  and  makes 
the  people  unmindful  of  the  fact  that  the  true  remedy  is  in  greater 
production  and  less  spending,  and  that  real  prosperity  comes  only 
from  individual  effort  and  thrift.  When  exchanges  are  again 


26 


made  in  coin,  or  in  a  currency  convertible  into  it  at  the  will  of  the 
holder,  this  truth  will  be  understood  and  acted  upon.” 

Secretary  Bristow  is  now  making  preparation  to  retire  the  frac¬ 
tional  currency  and  replace  it  with  silver  coin,  but,  without  any 
surplus  revenue,  he  will  not  be  able  to  accumulate  gold  in  the 
Treasury,  and  must  rely,  at  present,  on  the  sale  of  the  five  per 
cent,  bonds,  authorized  by  the  third  section  of  the  resumption  act. 
It  remains  to  be  seen  whether  Congress  will  have  the  wisdom  and 
courage  to  pass  any  further  laws  for  increasing  the  revenue,  or 
authorizing  any  further  preparations  for  resuming  specie  pay¬ 
ments  on  the  first  of  January,  1879.  This  is  the  great  question 
now  before  the  people.  I  have  a  strong  desire  to  witness  a  gen¬ 
eral  and  permanent  resumption  of  specie  payments.  If  I  live  to 
see  it  accomplished,  I  will  write  a  concluding  chapter  on  the  “His¬ 
tory  of  the  legal  tender  paper  money,  issued  during  the  Great 
Rebellion.”  Meantime  I  desire  to  repeat  that  if  the  legal  right  to 
fund  the  greenbacks  in  the  six  per  cent,  gold  bonds,  in  accordance 
with  the  original  legal  tender  act,  had  not  been  abrogated,  we 
would  have  reached  specie  payments  as  early  as  1868,  seven  years 
ago,  and  without  very  seriously  injuring  the  legitimate  business 
of  the  country. 

The  wit  of  man,  during  the  last  hundred  years,  has  not  been 
able  to  contrive  any  method  by  which  a  paper  currency  can  be 
circulated  on  a  par  with  gold,  unless  it  can  be  conveniently  con¬ 
verted  into  gold  coin  on  demand.  It  is  not  enough  that  “the 
whole  property  of  the  country”  is  held  liable  to  ultimately  pay 
the  greenbacks.  Such  security,  though  ample,  is  too  general  and 
intangible  for  the  purpose.  This  “whole  property”  can  only  be 
reached  and  applied  through  the  slow  process  of  taxation.  On 
this  general  theory  the  greenbacks  have  been  greatly  depreciated 
for  over  eleven  years,  and  the  government  will  continue  in  this 
discreditable  condition,  until  some  specific  provision  is  again  made 
for  its  redemption. 

It  was  issued  as  a  redeemable  currency — it  is  now  irredeemable , 
with  no  certain  standard  of  value,  and  not  possessing  the  requi¬ 
sites  of  a  commercial  currency.  Congress  ought  to  make  ample 
preparation  for  its  redemption  in  1879 — Will  it  do  its  duty  ? 

E.  G.  SPAULDING. 

Buffalo,  Oct.  1,  1875. 


TESTIMONIALS  IN  FAVOR  OF  THE  LEGAL  TENDER  ACT  AS  A 
“WAR  MEASURE.” 


FROM  HON.  WILLIAM  H.  SEWARD, 

Late  Secretary  of  State. 

Auburn,  April  26,  1869. 

My  Bear  Mr.  Spaulding : 

I  thank  you  for  a  copy  of  your  book.  It  is  written  without  passion  or 
prejudice,  and  makes  it  entirely  clear  that  in  adopting  a  legal  tender  cur- 
Tency,  the. government  adopted  a  means  not  merely  wise,  but  indispensible 
and  effective.  I  always  wonder  at  the  resistance  which  the  policy  encountered. 

With  kind  respect  and  esteem. 

Faithfully  your  friend, 

WILLIAM  H.  SEWARD. 

The  Hon.  Horace  Maynard,  of  Tennessee,  was  one  of  the  few  men  of  the 
South  who  remained  in  Congress  during  the  war,  and  always  supported  the 
Union  cause.  Having  been  for  many  years  a  member  of  the  Committee  of 
Ways  and  Means,  he  is  one  of  the  most  influential  men  in  the  House.  He 
was  a  member  of  that  Committee  during  the  winter  of  1861-2,  when  the  Legal 
Tender  Act,  the  Bank  Bill,  and  other  financial  measures,  were  matured,  and 
tfe  still  retains  that  position.  The  following  letter  from  Mr.  Maynard,  on 
that  question,  will  be  read  with  interest. 

Knoxville,  Tennessee,  Nov.  8,  1869. 

Eon.  E.  G.  Spaulding  : 

Dear  Sir: — Thanks  for  the  book,  as  well  as  the  copy  sent  me.  It  is  well- 
timed  and  much  needed.  So  successful  were  the  financial  arrangements  dur¬ 
ing  the  war  that  people  incline  to  believe  them  as  automatic,  accomplished, 
with  no  special  credit  to  anybody. 

Of  all  who  were  concerned,  you  were  the  one  to  have  prepared  the  book — 
entitled  as  you  are,  pre-eminently,  to  the  credit  of  the  great  measures  which 
carried  the  nation  so  triumphantly  through  the  financial  struggles.  While  I 
did  not  feel  at  liberty  to  participate  very  actively  in  the  passage  of  acts  which 
must  affect  other  portions  of  the  country  far  more  seriously  than  that  which 
it  was  my  fortune  to  represent,  it  gratifies  me  to  remember  that  both  in  the 
Committee  of  Ways  and  Means  and  in  the  House  they  received  my  unfailing 
support. 

As  a  result  we  have  now  the  best  currency  ever  known  in  the  nation.  Let 
it  now  he  made  convertible  into  coin  at  the  pleasure  of  the  holder,  and  nothing 
would  he  left  to  he  discussed.  Why  this  has  not  been  done,  why  it  is  not  done, 
why  it  should  not  be  done,  I  confess,  after  all  I  have  read  and  heard,  I  am 
not  able  to  see. 

One  of  these  days  some  bold  man  will  take  the  step,  and  then  everybody 
will  wonder  why  it  had  not  been  taken  years  before.  Would  that  you  were 
again  at  your  place  in  the  House. 

I  am,  very  truly  yours, 


HORACE  MAYNARD. 


28 


FROM  THE  HON.  CHARLES  SUMNER. 

On  the  Finances. 

Boston,  August  3,  1869. 

My  Dear  Sir: — You  have  done  a  good  service  in  preparing  your  book;  nor 
is  there  anybody  to  whom  this  duty  belonged  more  than  yourself.  In  all  our 
financial  trials,  while  the  war  was  most  menacing,  you  held  a  position  of 
great  trust,  giving  you  opportunity  and  knowledge.  The  first  you  used  at 
the  time  most  patriotically,  and  the  second  you  use  now  for  the  instruction 
of  the  country. 

I  am  not  content  with  the  long  postponement  of  specie  payments  ;  I  believe 
that  the  time  has  come  for  this  blessing,  and  I  begin  to  be  impafient 
when  I  see  how  easily  people  find  excuses  for  not  accepting  it. 

Believe  me,  dear  sir, 

Very  truly  yours, 

Hon.  E.  G.  Spaulding.  CHARLES  SUMNER. 


from  erastus  corning. 

Also  a  member  of  the  Committee  of  Ways  and  xYLeans  at  the  time  the  act  was 

passed. 

Newport,  August  30,  1869. 

Hon.  E.  O.  Spaulding,  Buffalo  : 

Dear  Sir: — Your  favor  of  the  14th  ult.  was  forwarded  from  Albany  to 
this  place.  Also  a  copy  of  your  “Financial  History  of  the  War.”  I  have 
read  it  with  much  interest,  and  can  say  that  I  consider  it  a  fair  and  impartial 
history  of  the  doings  of  the  Committee  of  Ways  and  Means  and  of  Congress 
while  I  was  a  member,  and  since  as  far  as  I  understand  their  action.  I  am 
pleased  that  you  have  seen  fit  to  place  their  doings  on  record.  I  thank  you 
for  the  copy  sent  me.  Yours  very  truly, 

ERASTUS  CORNING. 


HOUSE  OF  REPRESENTATIVES. 

Committee  of  Ways  and  Means. 

Washington,  D.  C.,  Feby.  25,  1866. 

Dear  Sir:— I  have  yours  of  the  23d  inst.,  and  have  mailed  to  you  to-day 
a  copy  of  Mr.  Sumner’s  speech  on  reconstruction,  also  the  Globe  which  con¬ 
tains  my  own,  on  the  Finance  Bill.  It  seems  to  me  that  you  have  a  right  to 
be  well  satisfied  with  the  part  you  took  in  initiating  the  financial  measures 
which  have  carried  the  country  so  successfully  through  the  war.  We  are 
somewhat  excited  here,  but  I  have  faith  that  everything  will  come  right  in  a 
little  time  if  we  are  discreet  in  our  action  in  Congress. 

Yours  with  great  respect, 

Hon.  E.  G.  Spaulding.  S.  HOOPER. 


FROM  SENATOR  SHERMAN. 

Mansfield,  Ohio,  June  14,  1869. 

My  Dear  Sir: — I  have  received  and  partially  read,  with  great  interest, 
your  Financial  History  of  the  War.  It  recalls  m^ny  interesting  events 


29 


almost  forgotten,  and  is  therefore  like  an  old  friend.  I  am  much  obliged  to 
you  for  it,  and  will  give  it  a  careful  reading  and  a  place  in  my  selected  set  of 
books.  Yery  truly  yours, 

Hon.  E.  G.  Spaulding.  JOHN  SHERMAN. 

FROM  B.  M.  STANTON. 

Late  Secretary  of  War,  a  short  time  before  his  death. 

Washington,  November  28, 1869. 

My  Dear  Sir: — I  hasten  to  render  my  thanks  for  a  copy  of  your  “History 
of  the  Legal  Tender  Act,”  and  the  accompanying  note,  received  this  morn¬ 
ing. 

No  one  could  more  fully  appreciate  than  I  did,  and  still  do,  the  vital  im¬ 
portance  of  the  financial  measures  adopted  for  maintaining  the  government 
during  the  war.  On  all  occasions,  in  private  conversation  and  in  public 
assemblages,  I  have  endeavered  to  do  them  justice  and  cause  them  to  be  esti¬ 
mated  as  I  estimated  them.  Without  them  I  do  not  see  hove  our  armies  could 
have  been  raised ,  equipped,  clothed,  fed,  transported  and  kept  in  the  field  until  the 
enemy  were  subdued.  But  my  attention  was  too  closely  absorbed  by  military 
affairs  for  me  to  discriminate  between  the  several  views  discussed,  or  to 
observe  to  whose  sagacity  and  energy  the ,  country  .was  most  indebted.  A 
hasty  glance  through  your  History  has  enabled  me  to  see  that. you  have 
afforded  means  for  correct  judgment  upon  the  interesting  points  involved. 

With  sincere  regard,  I  am, 

Truly  your  friend  and  obedient  servant, 

Hon.  E.  G.  Spallding.  EDWIN  M.  STANTON. 

FROM  HANNIBAL  HAMLIN. 

Late  Vice-President,  and  President  of  the  Senate  at  the  time  the  Act  was 

passed. 

Bangor,  November  5,  1869. 

My  Dear  Sir:— Please  accept  my  cordial  thanks  for  your  “Financial  His¬ 
tory  of  the  War  Legal  Tender”  which  you  sent  me.  I  have  given  it  a  hasty 
examination,  but  enough  to  see  that  it  is  a  full  and  true  history  of  the  sub¬ 
ject  of  which  you  treat,  presenting  the  facts  connected  therewith  in  their 
chronological  order.  A  work  to  set  the  public  judgment  right  at  this  time, 
and  for  reference  it  will  be  truly  valuable. 

I  am  surprised  to  know  that  no  one  of  the  historians  of  the  times  has  fur¬ 
nished  the  facts  and  evidence  which  you  have  so  fully  and  clearly  repre¬ 
sented.  Yours  truly, 

Hon.  E.  G.  Spaulding,  Buffalo,  N.  Y.  H.  HAMLIN. 

FROM  HON.  W.  w.  CORCOKAN. 

The  Banker  who  negotiated  the  United  States  Loans  during  the  war  with 
Mexico  in  1846-47. 

Washington,  September  13, 1869. 

My  Dear  Sir: — Many  thanks  for  your  kind  letter  of  the  9th,  with  a  copy 
of  your  “Financial  History  of  the  War.”  I  have  only  had  time  to  glance 
over  the  index.  It  will  be  very  valuable  and  interesting  volume  and  I  shall 


30 


have  pleasure  in  perusing  it.  No  one  can  doubt  that  the  making  the  issues  of 
the  United  States  a  legal  tender  was  the  great  element  of  success.  Without  it  the 
war  could  not  have  been  carried  on  six  months  longer.  Again  thanking  you  for 
thinking  of  an  old  friend, 

I  am  very  sincerely  yours, 

W.  W.  CORCORAN. 

E.  G.  Spaulding,  Esq.,  Buffalo,  N.  Y. 

PROM  BENSON  J.  LOSSING, 

Who  published  a  valuable  Illustrated  History  of  the  Military  Operations  dur¬ 
ing  the  Great  Rebellion — in  three  volumes. 

The  Ridge,  Dover,  N.  Y.,  Dec.  27,  1869. 

Hon.  E.  G.  Spaulding  : 

My  Dear  Sir: — I  cordially  thank  you  for  giving  me  the  opportunity  to 
peruse  your  valuable  History  of  the  Legal  Tender  Paper  Currency  issued  dur¬ 
ing  the  late  Rebellion — a  measure  which  more  than  any  other,  contributed  to 
the  salvation  of  the  Republic  from  great  disaster.  Without  money  suddenly 
and  amply  created,  there  could  have  been  no  army. 

That  measure  was  a  novelty — a  paradox  in  the  history  of  nations — a  forced 
loan ,  with  the  cordial  consent  of  the  lenders  !  The  sterling  common  sense  of 
the  loyal  people  saw  it  was  a  necessity,  and  accepted  it  with  cheerful  acqui¬ 
escence;  and  every  man  of  common  sense  now  sees  that  the  everlasting  good 
which  the  measure  wrought,  outweighs  a  thousand  fold  the  temporary  evils 
which  it  has  occasioned. 

It  appeared  to  me  at  the  time  (and  has  never  appeared  otherwise)  that  the 
originating  and  perfecting  of  that  measure  was  one  of  the  wisest  acts  of  true 
statesmanship  that  were  displayed  during  the  civil  war,  and  will  ever  be 
regarded  as  a  precedent  of  great  value  to  the  people  of  republics.  The 
clamor  against  the  measure,  during  the  war  and  since,  was  and  is  simply  the 
voice  of  selfish  partisanship,  and  the  cry  of  “unconstitutionality”  was  only 
the  cry  of  disloyal  politicians  against  the  efforts  for  the  salvation  of  the  repub¬ 
lic.  Wisely  did  Madison  declare  that  public  necessity  takes  precedence  of 
all  Constitutions;  and  Mr.  Lincoln  as  wisely  said  that  the  Union  is  older  than 
the  Constitution,  and  took  measures  outside  the  letter  of  the  Constitution  to 
save  it. 

The  philosophic  historian  and  statesman  of  another  century,  with  vision 
unobscured  by  the  smoke  of  conflict,  will  point  to  the  Legal  Tender  Paper 
Money  Act  as  one  of  the  chief  instrumentalities  which  preserved  for  them¬ 
selves  and  their  children  the  blessings  of  free  institutions  ;  and  among  the 
names  of  the  statesmen  to  whose  wisdom  and  energy  the  nation  is  chiefly 
indebted  for  the  measure,  yours,  sir  will  ever  appear  most  prominent. 

I  am,  dear  sir,  with  gratitude  fGr  your  public  services, 

Your  friend  and  fellow  citizen, 


BENSON  J.  LOSSING. 


31 


HON.  J.  8.  MORRILL, 

One  of  tlie  most  effective  men  on  the  Committee  of  Ways  and  Means  when 
the  Legal  Tender  Act  was  passed. 

Stafford,  Yt.,  June  9,  1869. 

My  Dear  Sir: — Your  favor  of  the  5th  inst.  came  to  hand  yesterday,  and 
your  book  on  the  Financial  History  of  the  War,  has  just  arrived.  Of  course 
I  have  not  yet  had  time  to  read  it,  but  I  have  no  doubt  of  its  having  received 
all  the  care  necessary  to  make  it  valuable,  and  I  know  of  no  one  who  could 
more  acceptably  perform  the  service.  You  and  I  differed  as  to  the 
policy  of  issuing  the  Legal  Tender  notes.  Forecasting  somewhat  the 
train  of  difficulties  in  the  way — such  as  increasing  the  ultimate  debt — disor¬ 
ganizing  trade  and  the  final  retirement.  I  then  thought  it  possible  to  avoid 
their  issue.  "Now  I  do  not  discuss  the  question  because  there  are  so  many 
unpatriotic  and  discordant  utterances  on  the  subject,  and  I  may  be  in  error, 
but  I  have  never  had  a  doubt  in  my  own  mind  that  we  could  have  furnished 
ample  means  to  the  Government  and  saved  hundreds  of  millions  of  our  public 
debt  by  reducing  the  discount  on  credit  to  the  minimum  final  through  some 
such  course  as  that  I  advocated  at  the  time.  Your  course  then  was  patriotic 
and  has  been  since,  and  some  of  the  errors  since  committed  I  know  ham  not  had 
the  sanction  of  your  judgment.  Others  have  gone  further  than  you  proposed, 
and  there  are  yet  others  who  even  now  do  not  propose  to  halt.  But  I  am 
hopeful  that  we  shall  in  due  time  emerge  from  our  present  unhappy  condi¬ 
tion  and  get  our  finances  in  a  condition  so  that  if  another  war  was  necessary, 
and  I  trust  that  day  may  be  far  off,  we  could  bear  our  part  without  extreme 
trial.  Please  accept  my  thanks  for  the  copy  of  your  work. 

Very  truly  yours, 

Hon.  E.  G.  Spaulding,  Biiffalo,  N.  Y.  JUSTIN  S.  MORRILL. 

HON.  SAMUEL  HOOPER, 

A  member  of  the  Committee  of  Ways  and  Means. 

Boston,  September  5,  1869. 

My  Dear  Sir: — Please  accept  my  thanks  for  your  book  on  the  finances 
during  the  war,  which  has  been  received.  I  have  not  had  time  to  read  it,  but 
have  looked  through  it  curiously,  and  saw  that  you  had  not  departed  from 
the  principles  which  influenced  us  when  we  were  striving  so  hard  to  get  the 
financial  bills  through  the  Congress.  I  shall  give  the  book  a  thorough  read¬ 
ing  before  Congress  meets.  Specie  payments  seem  as  far  off  as  ever.  Mr. 
Boutwell  seems  to  believe  the  reduction  of  the  debt ,  with  the  increase  of  business  will 
bring  about  resumption  in  due  time.  He  remarked  to  me  a  few  days  since  that 
with  the  present  tariff  and  internal  revenue  laws ,  the  whole  debt  could  be  paid  in 
twelve  years.  I  am  curious  to  see  what  financial  policy  he  will  announce  in 
his  annual  report  to  Congress.  I  have  great  distrust  of  the  action  of  Congress 
unless  the  Government  advocate  measures  to  restore  the  value  of  the  cur¬ 
rency.  A  positive  policy  on  the  part  of  the  Government  strengthens  public 
opinion,  and  that  operates  powerfully  on  the  action  of  Congress.  *  * 

Yours  with  regard, 


Hon.  E.  G.  Spaulding. 


S.  HOOPER. 


HORACE  GREELEY, 

In  the  New  York  Tribune t  July  7,  1869. 

“  We  render  hearty  thanks  to  the  Hon.  E.  G.  Spaulding,  of  Buffalo  for  his 
‘History  of  the  Legal-Tender  Paper  Money  issued  during  the  great  Rebellion. ’ 
It  is  the  clearest  and  tersest  account  yet  given  of  the  origin  of  the  Legal-Ten¬ 
der  act,  the  views  of  those  members  of  Congress  who  aided  and  of  those  who 
resisted  its  passage,  the  various  modifications  it  underwent,  closing  with  the 
text  of  the  bill  as  finally  passed;  the  construction  simultaneously  given 
to  it  with  regard  to  the  medium  wherein  the  Five-Twenty  bonds  were  pay¬ 
able,  etc.,  etc.  The  origin,  tenor  and  and  scope  of  the  National  currenc}7"  act, 
and  of  the  various  acts  by  which  our  systems  of  finance  and  currency  have 
since  been  modified,  are  also  elucidated  by  extracts  from  speeches  in 
Congress,  by  cotemporary  letters,  etc.,  etc.  Mr.  Spaulding  was  an  active 
member  both  of  the  Committee  of  Ways  and  Means,  and  of  its  sub-Committee 
having  charge  of  this  subject,  and  is  thus  enabled  to  throw  much,  light  on  the 
general  subject.  We  advise  any  man  who  wants  to  cheat  himself  into  the 
belief  that  the  funded  debt  of  the  United  States  may  lawfully  be  paid  in 
greenbacks  not  to  read  this  handy  volume,  unless  he  is  anxious  to  know 
that  he  is  a  rascal  and  that  everyone  sees  it.” 


The  following  additional  letters  will  appear  in  the  appendix  to  this  edition: 

Hon.  Hugh  McColloch,  late  Secretaryof  Treasury. 

“  Charles  Francis  Adams,  Massachusetts. 

“  Geo.  H.  Pendleton,  Ohio. 

“  C.  L.Valandigham,  Ohio. 

President  Woolsey,  Yale  College. 

Prof  Perry,  of  Williams  College. 

Judge  Noah  Davis  of  New  York. 

Judge  Fithian  of  New  York. 

Spaulding  to  J.  S.  Gibbons— Why  the  Banks  Suspended  in  1861. 

J.  S.  Gibbons’  reply.  [Sub-Treasury  Law.] 

John  E.  Williams,  Metropolitan  Bank,  New  York, 

Geo.  S.  Coe,  American  Exchange  Bank,  New  York. 

John  P.  Elton,  Waterbury  Bank,  Connecticut. 

The  old  United  States  Bank  and  National  Banks. 

President  Grant’s  veto  message,  April  22d,  1874. 

Hon.  Samuel  F.  Miller,  Justice  of  the  United  States  Supreme  Court. 

“  Samuel  Nelson,  late  Justice  of  the  United  States  Supreme  Court. 
“  It.  C.  Grier,  late  Justice  of  the  United  States  Supreme  Court. 

“  Judge  Swayne,  Justice  of  the  United  States  Supreme  Court. 

“  David  A.  Wells,  Political  Economist. 

“  Joel  T.  Headly  the  Historian. 

“  It.  E.  Fenton,  who  voted  for  the  Legal-Tender  Act. 

“  Carl  Schurz,  late  Senator  for  Missouri. 

“  II.  L.  Dawes,  Senator  from  Massachusetts. 

“  A.  M.  Clapp,  Public  Printing,  WashingtolV 
“  A.  A.  Low,  of  New  York. 

“  J.  P.  Bradley,  of  the  United  States  Supreme  Court. 

Prof.  James  P.  White,  Buffalo. 

Major-General  Sherman  and  Gen.  B.  F.  Butler,  Massachusetts. 

Hon.  II.  H.  VanDyke,  late  Assistant  Treasurer,  N.  Y. 

“  David  Wilder,  State  Treasurer,  Boston. 

“  J.  F.  D.  Lanier,  banker,  New  York. 

“  J.  J.  Knox,  Camptroller  of  the  currency. 

“  S.  S.  Cox,  House  of  Representative. 

“  J.  A  Garfield,  House  of  Representative 
“  A.  H.  Rice,  Boston,  House  of  Representative. 

“  John  T.  Heard,  Boston. 

“  F.  A.  Conkling,  New  York. 

“  Amasa  Walker,  Political  Economist. 

“  Geo.  Walker,  Springfield,  Mass. 

“  Senator  O.  P.  Morton. 

“  Senator  T.  O.  Howe. 

“  Henry  E.  Davies,  New  York. 

“  J.  O.  Putnam,  Buffalo. 

“  Martin  J.  Crawford,  Georgia. 


Vll 

Mr.  Spaulding  to  Mr.  Adams — legal  tender  vindicated,  -  -  -  -  41 
Vote  of  the  Senate  on  the  4th  $100,000,000  greenbacks,  -  -  -  42 

Mr.  Spaulding  to  Cincinnati  Gazette — First  mistake  of  Mr.' Chase,  -  -  43 

Old  U.  S.  Banks  and  National  Banks  (Sub-Treasury),  -  45 

Hon.  Hugh  McCulloch’s  letter*  1869, .  48 

Hon.  Charles  Francis  Adams  against  legal  tender,  -  -  -  49 

Hon.  Joel  T.  Headley’s  letter,  1 869, . 50 

Mr.  Spaulding  to  J.  S.  Gibbons  on  Sub-Treasury,  -  51 

J.  S.  Gibbons’  reply, . 54 

J.  E.  Williams,  Metropolitan  Bank,  New  York,  -  -  -  -  -  55 

John  P.  Elton,  Waterbury  Bank,  Conn., . r  55 

H.  H.  Van  Dyck,  Asst.  Treasurer,  New  York, . 57 

H.  F.  Yail,  Bank  of  Commerce,  New  York,  -  -  -  -  -  -57 

Judges  Nelson  and  Grier,  U.  S.  Supreme  Court, . 58 

Judges  Miller  and  Bradley,  do  . 59 

Judge  Noah  Davis,  New  York, . :  60 

Judge  Fitlrian,  New  York, . -  60 

Judge  Henry  E.  Davies,  27  N.  Y.  Reports, . 62 

President  Woolsey,  Yale  College, . 62 

Prof.  Perry,  Williams  College, . 63 

Prof.  J.  P.  White,  M.  D.,  Buffalo, . 63 

John  T.  Heard,  Esq.,  Boston, . 64 

C.  L.  Yallandigham,  Ohio, . 64 

Geo.  II.  Pendleton,  Ohio, . 65 

Martin  J.  Crawford,  Georgia, . 65 

President  Grant’s  veto  of  inflation  bill, . 65 

Senator  Timothy  O.  Howe,  Wisconsin, . 68 

Senator  O.  P.  Morton,  Indiana,  --------  69 

Senator  R.  E.  Fenton,  New  York, . 69 

Senator  Carl  Schurz’s  letter  and  speech, . 69 — 70 

E.  W.  Leavenworth’s  letter,  1869, .  72 

D.  A.  Wells  and  Amasa  Walker,  -  -  -  -  -  -  -  72—73 

Hon.  A.  H.  Rice  and  J.  A.  Garfield, . -  74 

Maj.  Gen.  Sherman  and  Gen.  Butler, . 74 

Hon.  Edward  Haight,  only  DdTnocrat  that  voted  for  legal  tender,  -  -  75 

Hon.  J.  O.  Putnam,  J.  F.  D.  Lanier  and  A.  M.  Clapp,  -  -  -  75 — 76  * 

Hon.  H.  L,  Dawes,  U.  S.  Senator,  -  -  -  Y  -  -  -  .  -  77 

French  finances — Gold  reserves . 77 

David  Wilder,  Boston, . 79 

H.  Bowlby  Wilson,  New  York, . 80 

Isaac  Sherman,  Esq.,  New  York, . 81 

Hon.  John  J.  Knox,  Comptroller  of  Currency, . 82 

Hon.  W.  P.  Fessenden,  John  Coburn,  A.  R.  Eno,  r . 83 

Hon.  F.  A.  Conklings  review  from  1861  to  1875— Mistakes  of|Secretary 

Chase,  etc., . 83—86 

Hon.  S.  S.  Cox  against  inflation  and  repudiation,  ....  87 


Vlll 


A.  A.  Low,  Esq.,  merchant,  New  York, . 

Gen.  J.  D.  Cox,  Secretary  of  the  Interior, . 

Hon.  J.  S  Morrill,  Senate  Finance  Committee, . 

Hon.  John  J.  Cisco,  confirming  facts  stated . 

Geo.  S.  Coe,  President  of  the  American  Exchange  Bank — Early  war 
finances  —  Mistakes  of  Secretary  Chase  —  Sub-Treasury  —  Specie 

payments  (able  and  historical), . 89- 

John  E.  Williams,  President  of  .Metropolitan  Bank,  New  York — Impor¬ 
tant  historical  letter  to  Sec’y  Chase — First  loans  of  $150,000,000  in 
1861 — Mr.  Chase  rejects  the  advice  of  experienced  bankers,  96- 

Geo.  Wm.  Curtiss,  Editor  Harper’s  Weekly, . 

E.  H.  Stoughton,  counsellor,  New  York, . 

Hon.  Montgomery  Blair,  Postmaster  General, 

Senator  Christiancy,  gold  and  paper, . 

Senator  Morgan, . . 

Col.  J.  W.  Forney,  Washington  Chronicle, . 

A.  M.  Clapp,  Public  Printer,  -  -  -  . 

Gen.  J.  E.  Hawley’s  speech, . - 


87 

88 

88 

88 

-96 

!— 99 

99 

99 

•  99 

100 

■  100 

101 

102 

103 


APPENDIX  TO  SECOND  EDITION. 


WAR  LEGAL-TENDER  VINDICATED. 

Spaulding’s  Exchange,  Buffalo,  April  20,  1870. 
Mr.  Henry  Brooks  Adams , 

Dear  Sir, — I  have  just  finished  reading  your  article  in  the  April  number 
of  the  North  American  Review ,  in  which  you  review  somewhat  at  length  the 
history  of  the  Legal-Tender  Act  recently  prepared  by  me,  criticising  the 
measure  very  freely  and  the  course  pursued  by  those  who  took  a  prominent 
part  in  its  passage  through  Congress.  The  measure  has  always  been  open  to 
public  sciutiny,  and  I  have  no  complaint  to  make  of  any  fair  criticism 
which  you  or  any  other  gentleman  see  fit  to  make.  It  was  passed  in  a  great 
emergency  as  a  “war  measure,”  and  not  with  a  view  to  have  it  continued 
indefinitely  as  a  permanent  policy  of  the  Government  in  time  of  peace.  As  a 
war  measure  it  proved  a  success,  and  has  therefore  vindicated  itself. 

Seeing,  however,  that  you  criticise  individual  action,  I  desire  to  correct 
one  mistake  which  you  have  fallen  into,  and  when  corrected  it  will  leave  your 
criticism  without  much  force  and  certainly  less  pointed  in  regard  to  my¬ 
self.  In  your  article  you  assert  that  I  claim  to  have  carried  the  measure 
“over  the  administration  and  through  Congress,”  and  this  assertion  is  quot¬ 
ed  and  repeated  by  you  several  times  in  the  course  of  your  article  ;  whereas 
the  words  quoted  are  not  taken  from  any  remarks  of  mine,  but  are  contained 
in  the  speech  of  Hon.  Theodore  M.  Pomeroy,  one  of  my  colleagues  from 
New  York,  delivered  in  the  House  of  Representatives,  February  19, 1862, 
while  the  amendments  of  the  Senate  were  under  consideration.  On  looking 
at  page  132  of  the  history  of  the  measure,  you  will  find  Mr.  Pomeroy’s 
remarks,  in  which  he  asserts  that  I  originated  this  measure  and  carried  it  tri¬ 
umphantly  “over  the  administration  and  through  the  Congress,”  but  no¬ 
where  can  you  find  any  such  words  of  mine.  On  the  contrary,  I  only  gave  a 
narrative  of  the  facts  in  chronological  order,  arid  on  page  6  of  the  book  you 
will  find  that  I  expressly  state  that  ‘‘  I  do  not  claim  any  particular  merit  or 
demerit  for  what  I  did  in  preparing  and  aiding  to  secure  the  passage  of  the  bill. 
I  was  placed  in  a  position  where,  if  I  performed  my  duty,  I  must  act,  and 
act  with  vigor  and  promptitude.  The  perilous  condition  of  the  country  did 
not  admit  of  hesitancy  or  delay.  I  endeavored,  in  the  peculiar  and  responsi¬ 
ble  position  in  which  I  was  placed,  to  do  what  I  conceived  to  be  my  duty, 
and  that  is  all  that  I  claim  to  have  done.  My  associates  performed  their 
duty  with  equal  fidelity  and  usefulness.”  These  were  the  words  I  used 
instead  of  the  words  which  you  quoted  from  Mr.  Pomeroy’s  speech  and  attri¬ 
bute  to  me.  In  giving  the  history  of  the  measure  it  was  my  aim  to  state  facts, 
leaving  it  for  others  to  decide  upon  the  merits  and  demerits  of  those  who  aided 


42 


in  the  passage  of  the  act,  as  well  as  those  who  opposed  it,  without  any 
unkind  or  harsh  expressions  on  my  part,  and  without  attributing  the  action 
of  the  parties  of  either  side  of  the  question  to  stupidity  or  ignorance,  which 
seems  to  be  the  drift  of  your  article,  assuming  on  your  part,  superior  know¬ 
ledge  and  wisdom. 

1  am  glad  to  notice  among  the  disparaging  epithets  you  use  against  true 
men  like  Tbadeus  Stevens,  John  A.  Bingham,  John  Sherman,  Henry  Wil¬ 
son,  and  other  zealous  patriots  in  the  union  cause,  that  you  speak  kindly  of 
my  late  friend,  Wm.  Pitt  Fessenden,  who  as  chairman  of  the  Finance  Comiiait- 
tee,  reported  it  to  the  Senate,  and  in  his  opening  speech  upon  the  great  im¬ 
portance  of  the  measure  said,  “it  needed  long,  careful  and  vigorous  discus¬ 
sion.  It  has  had  it  in  the  other  branch  of  Congress.  I  have  read  that  dis¬ 
cussion  from  beginning  to  end;”  and,  notwithstanding  you  think  the  debate 
was  weak  and  full  ot  absurdities,  Mr.  Fessenden  further  says:  “It  has  been 
able  and  clear  on  both  sides  of  the  question.”  He  voted  to  strike  out  the 
Legal  Tender  clause  in  the  bill,  and  failing  in  that,  he,  on  the  final  passage 
of  the  bill,  voted  for  it,  including  that  clause. 

I  am  pleased,  also,  that  in  your  article  you  speak  so  favorably  of  the 
“superior  discernment”  of  the  late  Judge  Collamer,  for  moving  to  strike  out 
the  legal  tender  clause  on  the  ground  that  it  was  unconstitutional. 

In  his  speech  on  that  occasion  he  said  in  substance,  “  That  the  oath  he  had 
taken  to  support  the  constitution  was  recorded  in  heaven  as  well  as  on  earth, 
and  that  even  if  it  was  a  necessity  he  could  not  vote  for  the  bill.”  Preston 
King  took  the  same  ground,  and  yet  both  of  these  gentlemen  in  less  than  a 
year  voted  for  $100,000,000  legal  tender  notes  in  addition  to  the  $300,000,000 
which  had  been  previously  issued.  They  were  true  men;  and  when  the 
exigency  arose  for  paying  three  or  four  months  back  pay  of  the  soldiers  who 
were  periling  theirs  lives  in  the  field  in  a  gigantic  struggle  with  the  rebel 
armies  during  the  cold  month  of  January,  1863,  both  these  senators  recorded 
their  votes  lor  the  additional  issue  of  $100,000,000  to  enable  the  Secretary  to 
redeem  the  promises  of  the  government  to  the  union  army,  so  that  the  men 
could  send  money  home  to  their  half  starved  families,  while  they  were  fight¬ 
ing  rebellion  in  front.  (See  history  of  legal  tender,  page  182.)  Mr.  Fessen¬ 
den,  Judge  Collamer  and  Preston  King,  three  patriots  now  dead,  thus 
recorded  their  votes,  holding  their  constitutional  scruples  ia  abeyance. 

The  vote  on  this  additional  issue  of  greenbacks  stood  as  follows  : 

Yeas — Messrs.  Anthony,  Arnold,  Browning,  Chandler,  Clark,  Collamer , 
Davis,  Dixon,  Doolittle,  Fessenden,  Foot,  Foster,  Hale,  Harding,  Harlan, 
Harris,  Henderson,  Howard,  Howe,  King ,  Lane,  (of  Indiana,)  Lane,  (of  Kan¬ 
sas,)  Latham,  McDougall,  Morrill,  Nesmith,  Rice,  Sherman,  Sumner,  Ten 
Eyck,  Turnbull,  Wade,  Wilkinson,  Willey,  Wilmot,  Wilson,  (of  Mass.,)  Wil¬ 
son,  (of  Missouri,)  and  Wright — 38  in  the  affirmative. 

Nays — Messrs.  Powell  and  Salisbury. — 2  in  the  negative. 

Approved  January  17, 1863. 

When  Mr.  Lincoln  signed  the  bill  to  authorize  this  issue,  he  expressed  his 
reluctance  thus  : 


43 


“While  giving  this  approval,  however,  I  think  it  my  duty  to  express  my 
sincere  regret  that  it  has  been  found  necessary  to  authorize  so  large  an  addi¬ 
tional  issue  of  United  States  notes,  when  this  circulation  and  that  of  the  sus¬ 
pended  banks  together,  have  become  so  redundant  as  to  increase  prices 
beyond  real  values,  thereby  augmenting  the  cost  of  living,  to  the  injury  of 
labor  and  the  cost  of  supplies,  to  the  injury  of  the  whole  country.” 

This  patriotic  record  on  earth,  in  a  desperate  struggle  for  liberty  and  union 
will,  I  trust,  on  the  day  of  final  account  stand  justified  in  the  sight  of  God,  as 
it  is  now  by  all  true  men,  and  that  “a  tear  from  the  recording  angel  in 
heaven’s  chancery”  will  blot  out  all  their  other  conflicting  records.  In  a 
crisis  presented  like  the  dark  hour  of  Januar}^,  1863,  I  shall  ever  honor  all 
those  noble  men  of  both  Houses  of  Congress  for  the  votes  thus  given  in  favor 
of  paying  the  soldiers  and  their  starving  families.  This  record  has  passed 
into  history,  and  will  ever  remain  an  enduring  memorial  of  their  fidelity  to 
the  national  cause. 

You  claim  in  your  flippant  article,  that  the  legal  tender  act  was  not 
necessary,  even  as  a  war  measure,  and  that  it  was  passed  under  a  “fraudu¬ 
lent”  misrepresentation  of  the  facts.  In  the  view  thus  taken  by  you,  I 
think  you  are  mistaken.  Iam  gratified,  however,  to  notice  you  say  “it  is 
but  just  to  add  that  Mr.  Spaulding  did  strongly  and  invariably  insist  upon 
the  difference  between  legal  tender  notes  which  were  fundable,  and  the  latter 
issue  which  were  not  so.”  I  regard  this  as  a  vital  part  of  the  measure,  and 
still  think  that  the  right  of  funding  into  6  per  cent,  bonds  ought  to  never 
have  been  abrogated.  It  was  necessary  to  prevent  redundancy,  and  conse¬ 
quently  to  prevent  depreciation  of  the  notes. 

I  have  no  desire  to  multiply  words  on  this  subject  at  this  time.  My  main 
object  in  this  letter  is  to  correct  your  erroneous  statement  in  regard  to  myself, 
and  at  the  same  time  speak  kindly  of  my  associates  who  sustained  the  union 
cause  in  its  hour  of  extreme  peril.  Notwithstanding  your  individual  criti¬ 
cism  of  those  who  spoke  in  favor  of  the  legal  tender  even  to  the  construction 
and  rhetoric  of  some  of  the  speeches,  it  is  probable  they  will  not  deem  it 
necessary,  as  I  do  not,  to  make  any  defense.  Deeds,  not  words,  are  their 
best  defense. 

If  you  find  that  you  are  in  error  in  your  statements  in  regard  to  myself  I 
would  like  to  have  you  make  the  correction,  and  advise  me. 

Very  respectfully, 

Your  obedient  servant, 

»  E.  G.  SPAULDING. 

HISTORY  OF  OUR  WAR  FINANCES. 

Letter  from  the  Hon.  E.  G.  Spaulding. 

Buffalo,  M^iy  16,  1870. 

To  the  Editor  of  the  Cincinnati  Gazette: 

I  have  just  finished  reading  your  articles  in  the  Gazette  of  the  12th  and  13th 
inst.,  on  the  “first  material  mistake”  made  by  the  Secretary  of  the  Treasury, 
in  the  first  six  months  of  the  war.  You  show  very  clearly  and  forcibly  the 


44 


antagonism  of  the  sub-treasury  to  modern  commercial  transactions,  and 
the  utter  impossibility  of  carrying  on  a  war  upon  a  specie  basis,  while  it  is  in 
operation,  discarding,  as  it  does,  the  bank  check  and  the  system  of  settling 
large  transactions  by  offset  through  the  Clearing  Houses  now  in  operation 
in  all  the  great  centres  of  commerce,  and  which  forced  the  banks  to  prema¬ 
turely  suspend  specie  payments  the  last  of  December,  1861. 

I  agree  with  you  that  the  time  has  come  for  gathering  up  into  convenient 
form,  the  facts  in  respect  to  the  financial  management  during  the  war,  in 
order  to  improve  the  lessons  drawn  from  the  past  nine  years  of  experience. 

Another  material  mistake  in  the  management  of  the  finances  followed  the 
first,  but  it  was  not  in  the  adoption  of  the  legal  tender  act,  nor  in  the  issue 
of  fundable  greenbacks,  but  in  the  unnecessary  large  overissue  of  ^wfundable 
greenbacks  and  five  and  six  per  cent,  interest  bearing  treasury  notes. 

The  whole  scope  and  object  of  the  first  legal  tender  act  was  to  quickly 
create  a  national  currency  then  imperatively  necessary  for  disbursement  to 
the  army  and  navy  (because  there  was  then  no  national  currency  in  existence 
that  could  be  had),  and  at  the  same  time  provide  for  funding  it,  as  soon  as  it 
became  excessive,  into  6  per  cent,  gold  bonds  in  order  to  prevent  any  great 
inflation  of  currency  or  prices;  and  I  am  free  to  say  that  I  never  advocated 
the  issue  of  any  greenbacks  that  were  not  so  fundable.  Not  one  dollar  of 
greenbacks  ought  to  have  been  issued  beyond  the  amount  necessary  to  float 
the  six  per  cent,  five-twenty  bonds.  The  funding  in  these  bonds  was  a  prac¬ 
tical  redemption  of  them,  and  there  was  no  great  excess  while  they  were  so 
redeemed.  It  was  not  a  redemption  equal  to  being  redeemed  in  gold,  but  its 
redemption  in  six  per  cent,  gold  bonds  was  a  good  practical  redemption,  the 
best  in  that  great  crisis  the  GoVernment  could  offer,  and  it  formed  a  pretty 
good  standard  of  value  on  which  to  rest  all  the  internal  transactions  of  the 
business  during  the  war;  and  certainly  no  one  could  be  very  materially  injured 
by  being  compelled  to  receive  greenbacks  in  payment  of  debts,  so  long  as  they 
could  be  immediately  returned  to  the  Government  in  exchange  for  gold 
bonds.  Gold  became  demonetized,  and  the  standard  of  value  fixed  by  that 
act  was  greenback  currency  convertible  at  the  will  of  the  holder  into  six  per 
cent,  gold  bonds.  No  large  amount  of  funding  took  place  until  May,  1868, 
because  there  was  no  excess  of  greenbacks.  At  that  time  the  greenbacks 
had  filled  up  the  channels  of  circulation,  became  somewhat  redundant,  and 
funding,  which  had  been  tardy,  now  became  more  active.  This  returning  of 
greenbacks  to  the, Treasury  for  bonds,  furnished  the  means  for  carrying  on 
the  war,  and  the  further  issue  of  greenbacks  became  unnecessary.  Jay  Cooke, 
during  the  nine  months  following  April,  1863,  successfully  funded  the 
balance  of  the  first  $500,000,000  5-20  bonds,  which  proved  conclusively  that  it 
was  not  necessary  to  inflate  the  currency  another  dollar,  either  by  the  issue  of 
greenbacks,  interest  bearing  treasury  notes,  or  any  other  form  of  inflating 
paper,  in  ord^r  to  provide  sufficient  means  for  carrying  on  the  war.  The 
greenbacks  were  printed  and  paid  out  for  government  disbursements,  and 
when  funded  wTere  returned  to  the  Treasury  ready  to  be  reissued  and  again 
funded,  and  so  on  from  week  to  week  and  month  to  month.  The  act  as  at 
first  adopted  was  self  regulating.  When  there  was  an  excess  of  greenbacks, 


45 


not  bearing  interest,  they  would  naturally  flow  into  the  six  per  cent,  bonds 
in  order  to  save  interest.  It  was  a  great  blunder  to  abrogate  this  healthy 
redemption  of  the  greenbacks.  It  unsettled  the  vital  principle  of  the  act, 
and  destroyed  the  standard  of  value  fixed  by  it.  Serious  mischief  followed. 
A  very  large  increase  of  greenbacks  and  interest-bearing  Treasury  notes  were 
issued  by  the  Secretary.  Inflation  of  prices,  wild  speculation,  uncertainty 
and  demoralization  was  the  consequence  throughout  the  remainder  of  the 
war,  and  which  still  continues,  so  that  even  up  to  the  present  time  there  is  no 
standard  of  value  for  the  greenback,  and  no  provision  made  for  redeeming  it 
either  in  bonds  or  gold,  and  specie  payments  seem  to  be  indefinitely  post¬ 
poned.  The  present  Secretary  prints  new  plates  and  reissues  this  currency 
without  any  fixed  standard  of  value,  thereby  perpetuating  the  uncertainty 
which  attaches  to  all  legitimate  business.  If  the  right  of  funding  the  green¬ 
backs  in  accordance  with  the  original  legal  tender  act  had  not  been  abrogated, 
the  standard  of  value  would  never  have  been  so  reduced,  the  demoralization 
would  have  been  very  much  less,  people  would  have  shaped  their  business  in 
accordance  with  the  law,  and  very  likely  specie  payments  would  have  been 
restored  after  the  war,  and  certainly,  at  no  time  would  the  value  of  green¬ 
backs  have  been  below  the  price  of  the  six  per  cent  5-20  bonds. 

The  right  given  to  the  holders  of  greenbacks  to  fund  into  six  per  cent, 
bonds  was  by  the  original  legal  tender  act  in  the  nature  of  a  contract ;  its 
abrogation  was  unjust  to  the  holders  of  the  notes,  and  I  always  regarded  it 
as  the  second  and  most  material  mistake  in  the  management  of  the  finances 
during  the  war.  The  facts  necessary  to  a  full  understanding  of  this  question 
you  will  find  stated  in  the  history  of  the  legal  tender  act,  from  page  167  to 
201,  and  I  hope  you  will  ellucidate  the  subject  as  clearly  as  jmu  have  the  first 
material  mistake  above  mentioned. 

1.  The  first  material  mistake  on  the  part  of  the  Secretary  of  the  Treasury 
was  in  compelling  the  associated  banks  of  New  York,  Boston  and  Philadel¬ 
phia  to  pay  the  gold  loan  of  $150,000,000  into  the  sub-treasury,  instead  of 
checking  directly  on  the  banks  for  it,  thereby  forcing  the  banks  into  a  pre¬ 
mature  suspension  of  specie  payments  in  December,  1861. 

2.  The  second  great  mistake,  and  the  one  that  will  be  the  longest  felt,  was 
in  abrogating  the  provision  in  the  first  legal  tender  act,  which  gave  the  right 
to  the  holders  of  the  greenbacks  to  fund  them  at  any  time  into  six  per  cent. 
5-20  gold  bonds.  It  will  take  a  long  time  yet  to  recover  from  the  evil  effects 
of  this  mistake. 

I  am,  very  truly  yours, 

E.  G.  SPAULDING. 

{From  the  American  Bond  Detector.) 

THE  OLD  UNITED  STATES  BANK  AND  NATIONAL  BANKS. 

By  the  Hon.  *E.  G.  Spaulding,  of  Buffalo,  N.  Y. 

“Among  the  other  beneficial  results  left  us  by  the  Great  "Rebellion,  was  the 
system  of  national  currency  and  banking — a  very  important  governmental 
and  commercial  agent,  as  well  as  bond  of  national  union. ;  but  which,  in  con- 


46 


sequence’ of  a  conflict  of  opinion  among  the  ablest  statesmen  of  the  country, 
was  not  attainable  in  time  of  peace. 

“The  first  United  States  Bank  was  established  in  1791,  under  the  influence 
of  that  peerless  statesman,  Alexander  Hamilton.  It  was  approved  by  Wash¬ 
ington,  performed  important  service  to  the  country,  and  continued  in  exist¬ 
ence  until  1811,  the  year  previous  to  the  last  war  with  Great  Britain,  when 
its  charter  expired,  and  consequently  great  embarrassments  were  experienced 
in  prosecuting  that  war,  because  the  government  was  left  without  any 
adequate  national  currency  to  carry  it  on. 

“The  second  United  States  Bank  was  chartered  in  1816,  and  continued  with 
like  beneficial  results  as  the  first  until  1836,  when  its  charter  expired.  Both 
these  banks  were  fiscal  agents  of  the  Government.  They  received  and  dis¬ 
bursed  all  the  public  money  entrusted  to  them  without  expense,  and  without 
the  loss  to  the  Government  of  a  single  dollar.  These  banks  were  likewise 
of  great  advantage  to  the  business  community.  Some  of  the  ablest  efforts  of 
Webster  and  Clay  were  in  favor  of  its  continuance,  and  notwithstanding  the 
decision  of  the  Supreme  Court,  headed  by  Chief  Justice  Marshall,  in  favor 
of  its  constitutionality,  President  Jackson,  by  reason  of  his  official  position, 
effectually  resisted  a  re- charter,  removed  the  Government  deposits  to  certain 
State  Banks,  which  proved  very  disastrous,  heavy  losses  were  sustained  by 
the  Government,  overtrading  ensued,  and  there  was  a  general  suspension  of 
specie  payments  in  1837. 

“The  friends  of  a  United  States  Bank  again  passed  abill  through  Congress 
for  another  bank  in  1841,  which  was  defeated  by  the  veto  of.  John  Tyler. 
The  sub-treasury  system  was  finally  adopted  in  1864,  which  isolated  the  Gov¬ 
ernment  from  all  banks  and  paper  money,  leaving  it  without  any  monied 
institution,  like  the  bank  of  England,  or  other  national  agency  to  resort  to  for 
aid  in  case  of  war.  Consequently  at  the  breaking  out  of  the  Rebellion  there 
*  was  no  system  of  currency  adequate  to  the  requirements  of  a  great  war. 

“  The  sub-treasury  and  state  banks  were  tried,  and  very  soon  found  to  be 
wholly  inadequate.  Secretary  Chase  recommended  the  present  national 
banking  system,  which  he  urged  upon  Congress  in  his  first  and  second  annual 
reports,  as  well  as  in  special  communications.  The  first  draft  of  this  bank 
bill  was  prepared  by  Mr.  Spaulding,  chairman  of  the  Sub-Committee  of  Ways 
and  Means,  having  this  subject  in  charge,  in  December,  1861,  but  it  did  not 
pass  and  become  a  law  until  February  25,  1863,  and  although  some  national 
bank  currency  was  issued  in  1864,  the  system  did  not  get  fully  into  operation 
until  1865.  It  was  of  considerable  benefit  in  supporting  the  public  credit 
towards  the  close  of  the  war,  and  all  the  banks  over  the  country  rendered 
essential  service  in  negotiating  the  loans,  but  the  Government  issue  of  the 
legal  tender  notes  with,  and  without  interest,  was  the  vital  measure  and  main 
support  of  the  Army  and  Navy,  during  the  war  for  the  union. 

“  The  experience  of  the  last  eighty  years  under  our  present  form  of  govern¬ 
ment,  has  clearly  shown  that  the  power  to  coin  money  from  the  precious 
metals,  and  regulate  its  value,  and  the  power  to  issue  bank  notes  should  be 
exercised  by  the  same  authority  and  be  equally  under  governmental  super¬ 
vision.  The  power  to  coin  money  is,  by  the  constitution,  vested  in  the 


47 


United  States  Government,  and  forbidden  to  the  separate  states.  In  regulat¬ 
ing  the  value  of  coined  money,  it  is  essential  that  the  government  should  also 
regulate  and  control  the  paper  money  issued  by  banks,  because  a  convertible 
paper  money  is  only  an  extension  of  coined  money,  and  when  both  kinds  of 
money  circulate  in  the  same  jurisdiction,  they  constitute  the  measure  of  value 
for  all  business  operations.  It  is  plain,  therefore,  that  both  kinds  of  money 
should  be  under  the  same  authority  and  control  in  order  to  regulate  the 
value  of  both.  State  bank  issues  are  local  in  character  and  credit,  and  possess 
none  of  the  attributes  of  a  national  currency. 

“The  function  of  regulating  the  currency  of  a  great  nation  possessed  of 
large  internal  as  well  as  foreign  commerce,  and  subject  to  the  calamities  of 
war,  can  only  be  successfully  performed  by  the  general  Government.  The 
extention  of  railroads,  water  ways,  and  internal  Commerce  all  over  the 
country  without  regard  to  state  boundaries,  and  the  vast  requirements  of  the 
late  war,  have  more  clearly  demonstrated  than  ever  before,  the  necessity  of 
a  convertible  paper  currency,  co-extensive  with  the  boundaries  of  the  United 
States. 

“  The  important  resulting  benefits  growing  out  of  the  great  rebellion  are 
many  and  various,  but  none  of  them  will  be  of  more  lasting  benefit  to  the 
government  and  people,  than  the  inauguration  of  the  System  of  National 
Currency  and  Banking,  now  in  full  operation,  and  which,  with  proper 
amendments,  will  be  adequate  to  the  wants  of  the  nation  in  time  of  peace  as 
well  as  in  the  time  of  war.  Banking  is  a  business  requiring  accumulated 
capital  and  loanable  funds.  The  issue  of  circulating  notes  is  another  import¬ 
ant  feature,  the  leading  idea  of  which  is  the  establishment  of  one  sound 
uniform  currency  of.  like  similitude  and  value,  co-extensive  with  the  bound¬ 
aries  of  the  United  States,  based  upon  national  credit  combined  with  private 
accumulated  capital,  and  under  the  general  control  and  supervision  of  the 
Treasury  Department  at  Washington. 

“By  the  National  Currency  act  the  Government  guarantees  the  currency 
and  limits  the  amount  to  $300,000,000,  (since  1874  there  is  no  limit);  requires 
it  to  be  secured  by  gold  bearing  bonds  deposited  with  the  Treasurer  of  the 
United  States  with  a  margin  of  ten  per  cent.;  requires  each  bank  to  redeem 
its  own  notes  in  lawful  money  on  demand,  and  to  keep  an  adequate  reserve 
for  that  purpose;  makes  them  a  legal  tender  for  all  taxes  and  other  dues  to 
the  government  except  customs,  and  for  all  salaries  and  other  dues  owing  by 
the  government  within  the  United  States,  except  the  principal  and  interest  of 
the  funded  debt.  It  also  makes  them  receivable  by  each  National  Bank  for 
all  ordinary  debts  due  them,  and  each  bank  designated  as  a  depository,  is  also 
required  to  receive  it  on  deposit  from  all  public  officers.  These  provisions  in 
the  law  operate  to  nationalize  and  decentralize  this  currency;  the  United 
States  Government  tax  of  ten  percent,  on  all  State  Bank  bills  effectually  kills 
the  issues  of  all  Stare  institutions,  and  consequently  the  national  currency 
with  all  these  advantages  has  a  wide  circulation  all  over  the  United  States, 
and  connected  as  it  is  with  the  greenback  legal  tender  notes,  they  together 
are  the  measure  of  value  in  carrying  on  the  internal  commerce  of  the  country, 
notwithstanding  their  depreciation.  Their  present  depreciation  is  a  fault 


48 


which  can  only  be  remedied  by  a  general  resumption  of  specie  payments,  in 
which  the  government  must  take  the  lead  by  placing  the  greenback  currency 
on  a  par  with  gold. 

“Two  things  remain  to  be  done  in  order  to  make  it  the  best  banking  system 
ever  devised  : 

“1.  Redemption  of  this  currency  on  demand  in  gold  and  silver;  at  the  same 
time  divest  the  law  of  every  feature  of  monopoly  by  making  it  free  and  open 
to  all. 

“  2.  Organize  one  or  more  banks  at  commercial  centres,  with  large  capitals 
but  limited  circulation,  under  the  supervision  and  control  of  the  Treasury 
Department,  to  receive  and  disburse  the  public  money,  without  expense, 
somewhat  like  the  Bank  of  England,  and  a  repeal  of  the  Sub-Treasury  act, 
which  in  its  operation  is  antagonistic  to  legitimate  business,  does  more  harm 
to  the  finances  than  it  does  good,  and  which  may  be  discontinued  without 
detriment  to  the  public  service,  and  thereby  save  the  expense  of  keeping  it 
in  operation. 

“  This  would  make  the  National  Banking  System  adequate  to  the  wants  of 
the  nation  in  peace  and  war ,  and  combine  a  large  share  of  the  capital  of  the 
country  in  support  of  the  government,  and  thereby  become  a  strong  bond  of 
national  union.” 

HON.  HUGH  McCULLOCH, 

Late  Secretary  of  the  Treasury. 

Prince  George’s  Co.,  Md  ,  1 
October  23,  1869.  f 

My  Dear  Sir: — I  have  been  absent  from  home  for  some  weeks  past,  on  a 
visit  to  Minnesota.  This  will  explain  to  you  how  it  has  happened  that  the 
receipt  of  your  favor  of  the  15tli  ult.  has  remained  so  long  unacknowledged. 
I  have  read  the  “Financial  History  of  the  War,”  which  you  were  kind  enough 
to  send  me,  and  am  greatly  pleased  with  it.  Such  a  work  was  much  needed, 
and  it  has  been  prepared  by  you  with  care  an(5  ability.  No  one  had  more  to 
do  with  the  financial  legislation  of  the  United  States  in  the  trying  years  of 
1861  and  1862  than  yourself,  and  no  one  was  more  familiar  with  the  views  of 
those  members  of  Congress  who  approved  of  the  issue  of  the  legal  tender 
notes.  Had  you  and  the  other  distinguished  gentlemen  who  co-operated 
with  you  in  the  preparation  of  “  financial  measures  for  the  support  of  the 
Government  ”  in  the  years  referred  to,  supposed  that  the  notes,  the  issue  of 
which  you  so  vigorously  and  Successfully  advocated,  would  be  used  as  a  cir- 
•  culating  medium  after  the  exigency  which,  in  you  judgment,  justified  their 
issue  had  ceased  to  exist,  I  hazard  nothihg  in  saying  that  other  measures 
would  have  been  resorted  to  to  raise  the  means  for  the  prosecution  of  the 
war.  Nothing  shows  how  far  the  country  has  departed  from  cardinal  prin¬ 
ciples  in  finance  and  morals  more  clearly  than  the  fact  that  the  measure  which 
was  advocated  by  its  friends  solely  as  a  war  measure  under  the  pressure  of  a 
great  necessity,  is  now  sustained  by  Congress  and  the  people  as  a  financial 
policy.  You  know  as  well,  if  not  better,  than  other  men,  under  what  circum¬ 
stances  and  for  what  purposes  the  legal  tender  notes  were  issued,  and  it  is  in 


49 


the  highest  degree  creditable  to  you  that  as  you  had  the  nerve  to  advocate  their 
issue  when  the  measure  was  unpopular,  you  also  have  now  the  nerve  to  advise 
that  they  be  retired,  in  opposition  to  a  decided  and  overwhelming  public  sen¬ 
timent  in  favor  of  their  being  continued  in  circulation  as  a  part  of  the  financial 
policy  of  the  Government.  Very  truly  yours, 

HUGH  McCULLOCH. 

Hon .  E.  G.  Spaulding,  Buffalo,  N.  Y. 

HON.  CHARLES  FRANCIS  ADAMS, 

Late  Minister  to  England, — On  Legal  Tender. 

Quincy,  October  13, 1869. 

E.  G.  Spaulding ,  Buffalo ,  N.  T. 

My  Dear  Sir: — Ttisnow  some  weeks  since  I  received  your  note  and  the 
book  which  you  were  so  kind  as  to  send  me.  In  the  midst  of  interruptions  of 
one  kind  and  another,  I  have  been  able  to  make  only  slow  progress  in  read¬ 
ing  it. 

I  think  I  can  very  fully  appreciate  the  difficulties  in  which  you  were  placed 
in  regard  to  the  course  to  be  taken,  and  I  have  no  disposition  to  censure  any 
one  who  acted  on  a  firm  and  honest  conviction  that  he  was  doing  his  best  to 
save  the  country.  I  have  no  doubt  that  you  did  so,  and  I  do  not  pretend  to 
affirm  that  you  may  not  have  been  right,  in  your  judgment,  of  the  nature  of 
the  crisis. 

The  whole  article  in  favor  of  Legal  Tender  seems  to  me  to  resolve  itself 
into  the  single  word  necessity.  The  same  argument  that  justified  the  Russians 
for  setting  fire  to  their  own  homes  in  Moscow  to  drive  out  Napoleon.  If  it 
be  notoriously  the  tyrant’s  plea  it  may  not  the  less  sometimes  be  a  justifica- 
tioh  in  the  cause  of  liberty  and  right. 

Unfortunately  for  myself  I  am  slow  to  be  convinced  that  the  cause  was  so 
desperate  as  absolutely  to  need  a  desperate  remedy.  *  The  great  objection 
which  I  have  to  the  enactment  of  Legal  Tender,  is  that  the  country  through  it 
has  for  the  first  time  taught  a  lesson  of  fraud.  Much  noise  has  been  made 
about  paying  the  debt  of  the  country  in  greenbacks.  I  do  not  see  wherein  it  is 
more  than  an  application  of  the  same  rule — to  wit :  that  a  government  can  by 
mere  force  of  its  strength,  make  a  creditor  take  less  than  the  amount  honestly 
due  to  him. 

The  worst  of  it  is  that  the  moral  sense  of  a  people  is  permanently  blunted 
by  the  resort  to  such  an  expedient.  I  do  not  see  when  or  how  we  shall 
return  to  sound  ideas;  for  all  the  great  army  of  debtors  created  since  the  war, 
by  allowing  seventy  cents  to  count  for  a  dollar,  are  not  likely  to  be  very  soon 
ready  to  pay  a  dollar  and  thirty  cents  or  its  equivalent  in  property  in  satis¬ 
faction  of  the  creditors.  Charles  XII.  of  Sweden,  in  his  day  of  “necessity,” 
issued  a  set  of  copper  coins  on  which  was  stamped  the  word  “dollar,”  and 
paid  his  army  just  as  if  it  really  was  what  it  professed  to  be.  Was  not  this  a 
cheat  ?  Yet  where  is  the  difference  except  in  the  degree  between  the  two 
proceedings  ?  The  Government  will  not  even  consent  to  take  this  paper, 
which  it  forces  upon  its  creditors,  in  payment  for  a  part  of  its  own  claims  on 


50 


debtors,  and  yet  it  pretends  to  claim  character  for  equal  and  honest  dealing 
in  money  transactions.  I  do  not  hesitate  to  say  that  if  a  private  banker  or 
merchant  were  to  think  of  introducing  such  an  expedient,  supposing  it  to  be 
possible,  he  would  instantly  lose  all  his  reputation  of  an  honorable  man. 

What  is  distinctly  perceptible  in  the  transactions  between  man  and  man, 
does  not  change  its  nature  when  applied  to  great  bodies,  merely  because  they 
are  too  strong  to  be  resisted.  So  long  as  a  legal  tender  note  remains  in  circu¬ 
lation  at  less  than  its  professed  value,  it  is  a  solemn  lie.  The  public,  to  be 
sure,  accommodates  itself  to  the  fraud  by  raising  the  price  of  its  commodi¬ 
ties  and  selling  for  a  dollar  what  is  really  worth  seventy  cents.  But  every¬ 
body  cannot  do  this.  Myriads  of  those  with  fixed  incomes  based  upon  the 
old  standard  fall  a  sacrifice,  in  their  privations  suffered  every  day  of  the  year. 
Who  is  there  then  can  make  the  loss  good  to  them  ? 

If  I  saw  any  symptom  of  return  to  sound  morals  within  any  reasonable 
time  I  should  qualify  my  language.  But  the  experience  of  the  past  teaches  us 
that  this  road  once  taken  terminates  only  in  utter  disregard  of  the  whole, 
obligation.  If  that  be  the  end  in  our  case,  it  would  have  been  cheaper  to  have 
tried  to  go  on  without  it. 

Yours  truly,  etc., 

C.  F.  ADAMS. 


HON.  J.  T.  HEADLEY,  THE  HISTORIAN. 

Newburgh,  Sept.  15,  1869. 

Dear  Sir: — Your  kind  favor  came  to  my  address  while  I  was  buried  in 
the  Adirondack  Mountains,  whither  I  had  gone  on  account  of  my  son’s 
health,  else  I  should  have  acknowledged  it  sooner.  I  have  read  your  book 
with  much  interest.  It  is  just  what  we  needed  to  fill  a  hiatus  in  the  history 
of  the  civil  war,  and  you  were  the  proper  person  to  write  it.  I  watched  your 
course  in  Congress  on  the  financial  question  with  much  interest.  Your  views 
always  seemed  to  me  more  practical  than  those  of  most  others.  You  seemed 
to  act  as  if  it  was  not  the  time  to  discuss  theories,  but  do  the  best  we  could 
under  the  circumstances.  In  short,  as  we  were  situated,  the  only  course  was 
a  choice  between  two  evils. 

I  value  your  work  highly  as  a  book  of  reference,  which  I  sadly  heeded. 
With  many  thanks  for  it,  I  remain,  Very  sincerely  yours, 

J.  T.  HEADLEY. 

(From  the  New  York  Times'). 

SPECIE  PAYMENTS. 

WHY  THE  BANKS  SUSPENDED  IN  1861 — EFFECT  ON  THE  SUB-TREASURY  LAW — 
LETTER  FROM  HON.  E.  G.  SPAULDING. 

The  following  important  letter  on  the  suspension  of  specie  payments  in 
1861,  and  what  led  to  it,  was  recently  written  by  Hon.  E.  G-.  Spaulding,  Presi¬ 
dent  of  the  Association  of  National  Banks,  and  author  of  the  History  of  the 
Legal  Tender  act,  to  J.  S.  Gibbons,  Esq.,  of  this  city,  who  recently  produced 
a  work  on  the  New  York  banks: 


51 


Buffalo,  March  29,  1870. 

J.  8.  Gibbons,  Esq., 

Dear  Sir: — Yours  of  the  24th  inst;  has  been  received,  and  in  reply  to  your 
inquiry,  I  would  inform  you  that  the  sixth  section  of  the  loan  act  of  August 
5,  1861,  partially  suspending  the  independent  treasury  law  of  1846,  was  at 
first  drafted  by  me,  but  was  considerably  modified  and  limited  in  its  opera¬ 
tion  by  amendments  suggested  by  Secretary  Chase  before  it  passed  the  two 
Houses,  and  became  a  law.  I  was  in  favor  of  making  the  suspension  of  the 
sub-treasury  act  general  in  regard  to  all  loans,  so  that  the  Treasurer  might 
draw  checks  directly  on  the  banks  for  the  amount  loaned,  in  order  that  the 
usual  bank  expedients  might  be  resorted  to  in  liquidating  such  checks  without 
disturbing  the  gold  reserves  held  by  the  banks,  then  in  a  remarkably  strong 
and  healthy  condition. 

This  subject  was  discussed  in  the  Committee  of  Ways  and  Means  at  that 
time.  I  expressed  the  opinion  that  the  loan  of  $250,000,000,  which  was 
authorized  at  the  extra  session  in  July  and  August,  1861,  could  not  be  made, 
and  the  gold  actualty  paid  over  into  the  sub-treasury,  without  so  weakening 
the  banks  that  they  would  be  obliged  to  suspend  specie  payments.  William 
Appleton,  then  a  member  of  the  committee,  and  a  practical  banker,  from 
Boston,  concurred  with  me  fully  in  that  opinion.  Mr.  Corning,  of  Albany, 
another  member  of  the  committee,  also  a  banker  and  practical  business  man, 
predicted  that  if  the  gold  reserves  of  the  banks  were  drawn  upon  for  such  large 
loans,  there  would  be  a  general  suspension  of  specie  payments  in  less  than  six 
months,  and  his  prediction  was  verified.  There  were,  however,  conflicting 
opinions  in  the  Committee  on  the  subject,  and  Secretary  Chase  seemed  to  be 
very  desirous  of  carrying  on  the  war  by  the  actual  disbursement  of  gold  and 
silver,  or  treasury  notes  convertible  into  gold  on  demand,  and  without  sus¬ 
pending  the  sub- treasury  law.  Finally,  Mr.  Appleton  and  myself  were  ap¬ 
pointed  a  sub-committee  to  prepare  a  section  suspending  the  sub-treasury  law 
in  respect  to  all  moneys  obtained  on  loans,  and  to  confer  with  Mr.  Fessenden, 
Chairman  of  the  Finance  Committee  in  the  Senate,  as  to  the  probability  of 
its  passage  in  that  body.  Upon  a  full  and  free  consultation  with  Mr.  Fessen¬ 
den,  he  consented  to  support  a  section  of  that  kind,  and  thought  it  would 
pass  the  Senate.  Mr.  Appleton  was  in  feeble  health,  and  the  duty  of  pre¬ 
paring  the  section  devolved  upon  me.  I  prepared  a  section  in  which  he 
concurred,  and  which,  in  general  terms,  suspended  the  sub-treasury  law  in 
regard  to  all  moneys  realized  upon  loans,  allowing  it  to  be  deposited  in  solvent 
specie-paying  banks  (state  banks,  of  course,  because  there  were  then  no  na¬ 
tional  banks),  and  authorizing  the  Treasurer  to  check,  from  time  to  time, 
directly  on  the  banks  for  the  amount.  From  a  careful  reading  of  the  books 
you  have  published,  I  am  impressed  with  the  belief  that  you  know  the  clear¬ 
ing  house,  locomotive  and  telegraph  are  among  the  most  useful  of  modem 
inventions,  and  that  the  sub-treasury  law  is  better  adapted  to  the  sixteenth 
than  the  nineteenth  century.  You  are  familiar  with  the  New  York  Clearing¬ 
house,  and  know  that  seventy-five  millions  of  dollars  of  checks  and  drafts 
may  be  daily  liquidated  and  fully  cancelled  by  paying  in  gold  a  resulting 
balance  of  not  exceeding  from  two  millions  to  three  millions  of  dollars,  and 


52 


that  the  whole  operation  could  be  concluded  in  three  or  four  hours,  and  that 
a  similar  balance  at  the  London  Clearing-house  would  be  paid  mainly  by  the 
other  banks  and  bankers  giving  their  checks  on  the  Bank  of  England,  and 
without  using  any  gold  at  all.  This,  you  are  aware,  economizes  time  as 
well  as  the  volume  of  currency  necessary  to  do  this  large  business,  and  that 
it  could  as  easily  be  applied  to  government  operations  as  to  private  business. 
In  this  way  I  believe  that  the  great  bulk  of  the  supplies  and  material  of  war 
for  the  army  and  navy  could  be  paid  for  by  the  usual  bank  expedients,  and 
by  offset  through  the  Clearing-house  of  New  York  and  other  cities,  without 
materially  disturbing  the  gold  reserves  of  the  banks,  except  in  the  payment 
of  balances. 

The  sub-treasury  law  at  that  time  seemed  to  be  popular  with  the  Secretary 
of  the  Treasury,  and  with  some  members  of  the  Committee  of  Ways  and 
Means,  as  well  as  the  Finance  Committee  of  the  Senate;  and  the  section 
finally  passed  in  the  modified  form  in  which  it  now  appears  in  the  law  of 
the  5th  of  August,  1881,  and  is  as  follows: 

§  6.  And  be  it  further  enacted,  That  the  provisions  of  an  act  entitled  “  An 
act  to  provide  for  the  better  organization  of  the  Treasury,  and  for  the  collec¬ 
tion,  safe-keeping,  transfer  and  disbursements  of  the  public  revenue,”  passed 
August  6,  1846,  be  and  the  same  are  hereby  suspended,  so  far  as  to  allow  the 
Secretary  of  the  Treasury  to  deposit  any  of  the  moneys  obtained  on  any  of 
the  loans  now  authorized  by  law  to  the  credit  of  the  Treasurer  of  the  United 
States,  in  such  solvent  specie-paying  banks  as  he  may  select,  and  the  said 
moneys  so  deposited  may  be  withdrawn  from  such  deposit  for  deposit  with 
the  regular  authorized  depositaries  or  for  the  payment  of  public  dues,  or  paid 
in  redemption  of  the  notes  authorized  to  be  issued  under  this  act,  or  the  act 
to  which  this  is  supplementary,  payable  on  demand  as  may  seem  expedient 
to  or  be  directed  by  the  Secretary  of  the  Treasury. 

No  question  can  be  raised  as  to  the  good  intentions  of  Secretary  Chase  in 
administering  the  loan  laws,  but  it  is  obvious  now  that  he  did  not  at  that  time 
fully  comprehend  the  labor-saving,  money-saving  and  general  utility  which 
results  in  the  settlement  of  checks  and  drafts  through  the  banks,  and  the- ad¬ 
mirable  system  of  offset  through  the  clearing-house.  The  wonderful  facility 
then  in  operation  in  New  York,  Boston  and  Philadelphia,  for  transferring 
and  liquidating  debts  without  disturbing  the  gold  reserves  held  by  the  banks, 
was  wholly  ignored  by  the  Secretary.  This  operated  almost  as  unfavorably 
as  if  the  Secretary  of  War  had  rejected  the  locomotive  in  transporting  the 
army.  The  rejection  of  the  bank  check  and  clearing-house  made  it  necessary 
to  increase  the  volume  of  currency  in  various  forms  in  about  the  same  pro¬ 
portion  as  the  rejection  of  the  locomotive  would  have  made  it  necessary  to 
increase  the  number  of  horses  to  supply  and  transport  the  army. 

The  banks  in  the  three  cities  above  named  most  patriotically  agreed  to  loan 
to  the  Government  about  $150,000,000,  which  could  have  been  easily  passed 
to  the  credit  of  the  Treasurer  on  their  books.  The  Secretary  had  the 
power;  under  the  above  section,  to  have  directed  the  Treasurer  of  the 
United  States  to  check  directly  upon  the  banks  for  this  large  sum,  and  the 


53 


largest  amount  of  the  checks  so  drawn  would  have  been  settled  by  offset 
through  the  clearing-house  without  requiring  but  a  small  balance  to  be  paid 
in  gold.  Instead  of  doing  so,  the  Secretary  required  the  money  to  be  counted 
and  paid  over  into  the  sub-treasury  on  all  these  loans.  This  very  soon  dis¬ 
turbed  the  gold  reserves  of  the  banks,  and  it  became  painfully  certain  to  the 
managers  of  the  banks  in  New  York  and  other  cities,  as  early  as  December, 
1861,  that  the  policy  which  the  Secretary  adhered  to  must  inevitably  lead  to  a 
general  suspension  of  specie  payments. 

A  meeting  of  bank  officers  was  held  at  the  American  Exchange  Bank  in 
the  city  of  New  York,  December  28,  1861.  One  of  the  bank  presidents,  in  a 
well-considered  speech  delivered  on  that  occasion,  criticising  the  course  of 
Secretary  Chase  in  regard  to  these  loans,  said  that 

“He  (Secretary  Chase)  was  urged  to  draw  directly  on  the  banks.  Coin 
being  the  basis  of  credits,  it  was  only  in  that  way  the  increased  financial  opera¬ 
tions  of  the  Government  could  be  conducted,  for  it  was  impossible  to  main¬ 
tain  the  superstructure  of  credit  when  the  basis  is  withdrawn,  for  in  destroying 
the  basis  the  superstructure  is  also  swept  away.  He  refused  to  draw  directly 
upon  the  banks  for  the  proceeds  of  the  loan  taken  by  each.  We  are  informed 
that  the  act  of  Congress  was  passed  expressly  for  the  purpose  of  authorizing 
him  to  do  so,  but  he  gave  it  a  different  interpretation,  which  may  be  the  cor¬ 
rect  one,  although  I  do  not  think  so.” 

The  failure  of  the  Secretary  to  recognize  the  suspension  of  the  sub-treasury 
law,  and  his  rejection  of  the  bank-check  and  clearing-house,  was  the  first 
material  mistake  made  in  the  management  of  the  finances  during  the  war. 
The  Secretary  was  intent  upon  having  the  gold  for  disbursement,  without 
fully  comprehending  the  effect  this  large  drain  would  have  upon  the  banks 
and  the  general  finances  of  the  country. 

The  banks  immediately  thereafter  suspended  specie  payments,  and  there  is 
but  one  opinion  among  practical  bankers,  that  such  suspension  was  hastened 
by  the  injudicious  action  of  the  Secretary  of  the  Treasury. 

The  attempt  of  the  Secretary  to  carry  on  the  finances  during  the  war  upon 
a  specie  basis,  without  the  aid  of  the  bank-che;ck  and  clearing-house,  having 
broken  down,  I  immediately  introduced  in  the  House  the  first  legal  tender 
act,  which,  after  an  able  and  full  discussion  in  both  Houses  of  Congress, 
finally  became  a  law  on  the  twenty -fifth  of  February,  1862.  I  sent  you  yes¬ 
terday  a  book  recently  prepared  by  me,  containing  a  history  of  this  most  im¬ 
portant  measure. 

This  is  my  answer  to  your  inquiry: 

I  desire  to  add  that  I  have  reflected  much  during  the  last  nine  years  upon 
the  sub-treasury  law  and  its  effect  upon  Government  loans,  as  well  as  upon 
the  general  business  of  the  people.  It  is  my  deliberate  conclusion  that  a  great 
war  can  never  be  successfully  carried  on  without  a  suspension  of  specie  pay¬ 
ments  while  the  sub-treasury  law  is  in  operation.  I  believe  further  that  the 
financial  affairs  of  the  Government,  as  well  a,s  the  general  business  of  the 
whole  people,  could  be  much  better  conducted  without  the  sub-treasury  law 
and  with  much  less  expense. 

A  system  of  finances  for  this  great  country  which  will  be  adequate  to  the 
wants  of  the  Government  and  people,  in  peace  and  war,  has  yet  to  be  organ¬ 
ized.  Very  truly  yours,  E.  G.  SPAULDING. 


54 


REPLY  OF  J.  S.  GIBBONS,  ESQ. 

New  York,  April  6,  1470. 

Hon.  E.  G.  Spaulding, 

Dear  Sir: — I  liave  to  thank  you  most  cordially  for  your  note  of  March 
28th  and  the  book  therein  ordeTred,  and  for  your  interesting  letter  at  length 
of  the  29th  in  answer  to  my  enquiry  concerning  the  legal  tender  act.  With 
all  your  views  I  fully  concur.  If  Mr.  Chase  had  ever  been  a  banker  or  a 
merchant,  he  might  have  joined  theory  and  practice  and  had  the  aid  of  both, 
but  as  it  was  he  only  had  the  former;  and  that  was  a  theory  of  his  own  brain, 
which  through  his  inordinate  self-conceit  has  cost  the  country,  in  all  proba¬ 
bility,  a  thousand  millions  of  debt,  beyond  what  would  have  been  contracted 
on  lower  prices.  I  do  not  believe  a  more  ignorant  man,  of  practical  business 
affairs  can  be  found  in  public  life.  If  he  had  only  been  a  general  reader  of 
history,  to  say  nothing  of  political  economy,  he  would  not  have  blundered  so 
dreadfully,  nor  at  last,  have  failed  so  utterly  as  a  Financial  Minister.  There 
were  people  to  praise  him  at  the  outset,  but  they  were  ignorant  like  himself, 
of  all  fiscal  history  ;  and  even  they  have  now  generally  joined  in  with  the 
popular  condemnation  of  his  management. 

I  find  the  data  of  the  Independent  Treasury  history  so  mixed  and  volumin¬ 
ous,  and  greatly  in  very  small  type,  that  I  am  much  discouraged  in  my  attempt 
to  reduce  it  to  an  intelligent  narrative.  But  I  shall  persevere.  It  is  a  patent 
absurdity  that  the  hoarding  of  the  most  valuable  part  of  our  currency,  is  a 
strength  to  the  currency  !  What  you  say  is  perfectly  true — that  an  abstrac¬ 
tion  of  coin  from  use,  necessitates  a  corresponding  enlargement  of  the  other 
media  of  exchange. 

I  am  heretical  enough  not  to  believe  in  the  National  Bank  Scheme.  It  is 
an  insidious  plan  of  currency  that  is  never  practically  redeemed,  and  never 
will  be.  But  we  have  learned  from  it,  and  tested  the  advantages  of  a 
“national  circulation,”  and  that  is  a  good  deal.  It  will  serve  its  day  and  go 
by  the  board. 

Then,  we  may  adopt  the  scientific  idea  of  a  National  Bank,  of  which  the 
Bank  of  England  is  the  most  conspicuous  example.  Our  finances  must  be 
*  Federalized,  as  our  states  have  been,  and  we  should  then  soon  govern  the 
exchanges  of  the  world,  The  present  system  is  a  national  bank  with  all  its 
capacity  of  mischief,  and  little  of  its  good.  Again  thanking  you  for  your 
letters  and  the  book. 

Very  truly, 

J.  S.  GIBBONS. 

The  following  letter,  addressed  to  Mr.  Spaulding  by  J.  E.  'Williams,  Esq., 
President  of  the  Metropolitan  Bank,  New  York,  is  one  that  ought  to  com¬ 
mand  attention.  Mr.  Williams  has  no  superior  among  the  bankers  of  the 
country  in  financial  ability  and  experience.  His  views,  with  respect  to  the 
financial  situation  of  affairs,  coinciding  with  those  made  public  by  Mr. 
Spaulding,  are  expressed  with  great  clearness  and  force  : 


55 


Metropolitan  Bank,  ) 

New  York,  April  6,  1864.  ) 

Hon.  E.  Q.  Spaulding, 

My  Dear  Sir  : — Many  thanks  for  your  letter,  which  I  have  read  in  the 
Buffalo  Express.  It  is  quite  time,  I  think,  that  the  friends  of  the  adminis¬ 
tration,  who  care  more  for  that,  and  for  our  general  government,  than  for 
the  crude  notions  of  finance  prevailing  at  Washington,  should  speak  out,  and 
fearlessly  criticise  the  measures  they  disapprove. 

The  five  per  cent,  loan  is  a  failure — at  least  so  regarded  here,  hy  every 
business  man  I  have  heard  speak  of  it — and  ought  to  be  withdrawn  at  once 
from  the  market.  That  which  has  been  taken  should  be  exchanged  for  six 
per  cent,  bonds  at  the  option  of  the  owners,  and  a  loan  bearing  six  per  cent, 
interest,  payable  in  gold,  offered  to  the  public  without  delay. 

I  understand  that  between  seventy  and  eighty  millions  of  demands  on  the 
Treasury  have  accumulated  in  Washington,  and  now  await  payment.  This 
ought  not  to  be.  The  money  market  is  easy — the  loan  at  six  per  cent,  would 
now  readily  be  taken,  and  this  favorable  state  of  financial  affairs  should  be 
seized  on  to  secure  money  for  the  Government. 

And  why  not  pay  six  instead  of  five  per  cent,  interest  ? 

Do  not  the  people  pay  the  taxes  from  which  this  interest  is  paid  ?  Is  not 
money  in  this  country  worth  fully  six  per  cent  ?  Can  the  Government 
reasonably  expect  to  carry  on  an  expensive  war  and  hire  money  by  the  hun¬ 
dreds  of  millions  at  less  than  six  per  cent.?  Is  it  fair  to  tax  the  people  to 
their  utmost  capacity  to  pay  and  then  expect  them  to  furnish  funds  at  less 
than  the  market  price?  Is  not  such  a  course  an  unjust  tax  on  the  good  sense 
and  patriotism  of  the  people  of  this  country  ? 

This  constant  increase  in  the  volume  of  the  paper  currency  is  having  a  very 
discouraging  effect  on  all  the  prudent,  thinking  people.  Prices  have  felt  the 
last  addition  of  one  or  two  hundred  millions  much  more  than  the  previous 
four  hundred  millions  ;  for  the  reason,  that  the  first  issue  was  needed  for  the 
business  of  the  country,  while  it  would  seem,  from  the  effect  produced  on  the 
market  values,  that  the  last  issues  were  not  required  by  any  business  demand 
whatever,  but  are  merely  a  make-shift  of  Mr.  Chase  to  meet  present  demands 
on  the  Treasury.  Yours  truly, 

J.  E.  WILLIAMS. 


JOHN  P.  ELTON,  ESQ. 

President  of  the  Waterbury  Bank,  Connecticut,  an  experienced  financier  and 

business  man. 

Waterbury,  April  1,  1864. 

Hon.  E.  G.  Spaulding, 

Dear  Sir: — I  have  just  received  the  Buffalo  Morning  Express  of  the  26th 
March,  in  which  is  your  admirable  letter  to  Morris  Ketchum,  Esq.,  of  Now 
York,  on  the  finances  of  the  country.  I  had  previously  seen  extracts  from  it 
in  the  Tribune ,  and  its  remarks  upon  it.  On  reading  the  letter  in  full  I  dis¬ 
cover  the  same  standard  views  ever  expressed  by  you,  and  to  which  I  have 


56 


always  given  ray  hearty  assent.  As  I  have  before  stated  to  you,  it  has  ever 
appeared  to  me  perfectly  plain  and  simple,  this  matter  of  our  finances. 
When  it  was  fully  settled  that  we  could  not  carry  on  this  war  on  a  gold  basis, 
and  that  some  form  of  paper  money  must  be  substituted,  while  the  war  was 
continued,  it  has  seemed  to  me  that  there  was  but  one  proper  course  for 
the  Government  to  pursue,  and  that  to  issue  legal  tender  notes  and  pay  every 
claim  against  the  Government  as  fast  as  presented,  and  to  create  (or  issue)  a 
government  bond  bearing  six  per  cent,  interest  in  gold,  in  which  these  legal 
tenders  could  at  all  times,  at  the  pleasure  of  the  holder,  be  converted.  In  my 
opinion  there  should  not  have  been  but  one  kind  of  bonds  issued,  and  that  a 
20-year  bond,  at  least  until  one  thousand  million  had  been  issued  ;  after  that 
point  had  been  reached,  I  would  not  have  particularly  objected  to  the  issue 
of  5-20  6  per  cent,  bonds,  redeemable  after  five  years,  but  as  you  state  in  your 
letter  to  Mr.  Ketchum,  there  should  never  have  been  but  one  standard  of 
interest  for  government  bonds. 

(Temporary  loans  such  as  2-year  5  per  cents,  orany  other  temporary  loan, 
would  have  no  effect  on  the  general  principle).  6  per  cent,  is  a  fair  standard 
for  the  Government  and  the  people,  and  to  that  all  standard  values  should 
bear  a  proper  relation. 

In  my  opinion  the  country  could  never  be  flooded  with  a  depreciated  cur 
rency  so  long  as  the  door  was  open  to  convert  surplus  money  into  6  per  cent, 
gold  bearing  bonds.  I  have  a  simple  metaphor  which  I  sometimes  apply 
to  this  matter.  I  compare  it  to  a  flowing  stream,  on  which  a  dam  is  built, 
and  when  the  water  rises  to  its  height  it  easily  and  gracefully  flows  over  and 
nothing  more  is  seen  of  it.  Now  when  the  country  has  more  floating  paper 
money  than  it  wanted,  it  will  surely  flow  into  a  place  of  rest,  (or  Bonds).  It 
will  be  impossible  to  keep  afloat  an  amount  great  enough  to  materially  inflate 
prices. 

Since  it  has  been  given  out  that  we  were  to  have  a  bond  bearing  5  per  cent, 
put  upon  the  market,  I  have  discovered  more  uneasiness  as  to  the  future  of 
our  financial  affairs-  than  ever  before  since  the  war  commenced.  It  is  so 
apparent  that  it  is  to  be  forced  upon  the  people  against  their  will,  that  it  pro¬ 
duces  distrust.  If  it  could  be  done  without  diluting  or  watering  the  cur¬ 
rency,  it  might  be  a  debatable  policy.  But  as  it  cannot  it  does  not  even  admit 
of  that.  What  Mr.  Chase  can  mean  by  his  present  policy  I  cannot  divine.  If 
this  loan  has  to  be  negotiated  abroad  it  might  not  effect  us  here,  but  no  great 
amount  of  it  can  be,  nor  do  I  deem  it  advisable  it  should  be. 

We  can  absorb  all  the  Government  needs  at  home,  and  without  the  least 
inconvenience,  if  they  will  keep  within  easy  reach  of  the  people  a  6  per  cent, 
gold  bearing  bond,  and  I  should  prefer  that  not  one  dollar  should  go  abroad. 

Let  heavy  taxation  follow  a  free  issue  of  legal  tender,  and  a  wide  door 
open  for  conversion  into  6  per  cent,  gold  bearing  bonds,  the  Government  may 
-without  fear  ride  out  the  financial  storm  in  perfect  composure. 

Truly  your  friend, 


JOHN  P.  ELTON. 


57 


IION.  H.  H.  VAN  DYCK. 

Albany,  April  4,  1864. 

E.  G.  Spaulding , 

Dear  Sir:— Accept  my  thanks  for  the  several  papers  forwarded.  Your 
letter  “hits  the  nail  on  the  head”  beyond  a  doubt,  and  I  agree  fully  in  your 
expressed  views,  as  to  the  evil  consequences  of  Mr.  Chase’s  action  in  unsettl¬ 
ing  the  rate  of  interest  on  conversions.  The  whole  country  will  see  ere 
many  months,  that  your  opinion,  and  congressional  action,  was  most  sound 
throughout.  The  Committee  of  Ways  and  Means,  now  entirely  under  the  con¬ 
trol  of  Mr.  Hooper,  on  financial  subjects.  *****  * 

It  looks  as  if  the  10-20  loan  was  to  be  a  failure.  Had  Chase  kept  right  on 
with  the  6’s  he  would  have  absorbed  all  the  spare  capital,  (or  rather  credit,)  of 
the  country,  and  been  in  a  sleek  condition,  instead  of  coming  out  “spring 
poor,”  as  a  barnyard  horse.  Yours  truly, 

H.  H.  YAN  DYCK. 


HENRY  F.  VAIL. 

National  Bank  of  Commerce  in  New  York. 

February  24,  1869. 

E.  G.  Spaulding,  Esq.,  Buffalo, 

Dear  Sir: — I  duly  received  your  favor  of  16tli  inst.,  with  the  advanced 
sheets  as  stated,  of  your  intended  publication  on  the  Legal  Tender  act,  which 
will,  I  think,  prove  a  work  of  interest  to  financial  men. 

You  are  doubtless  aware  that  the  officers,  and  a  majority  if  not  all  of  the 
Directors  of  the  Bank  of  Commerce,  did  not  coincide  with  the  views  of  Mr. 
Gallatin  and  associates,  who  visited  Washington  in  January,  1862.  We  had 
no  hand  in  appointing  them  as  delegates  on  behalf  of  the  banks,  but  on  the 
contrary,  Messrs.  Chas.  H.  Bussell  and  Deming  Duer,  directors  of  the  bank, 
and  myself  as  its  cashier,  were  in  Washington  early  in  January,  1862,  as  a 
committee  from  the  Bank  of  Commerce  on  the  subject  of  the  national  finances, 
when  several  gentlemen,  delegates  from  certain  banks  in  New  York,  Boston 
and  Philadelphia,  appeared  in  Washington  in  opposition  to  the  financial 
measures  then  proposed  and  under  consideration  by  Congress. 

The  Committee  of  the  Bank  of  Commerce  not  concurring  in  the  views  of 
these  gentlemen,  did  not  unite  in  the  meeting  called  on  Saturday,  January  11, 
1862,  at  the  office  of  the  Secretary  of  the  Treasury,  to  confer  with  the  Com¬ 
mittee  of  Ways  and  Means  and  the  Finance  Committee  of  the  Senate.  Mr. 
Russell,  (and  I  think  one  or  two  other  directors  of  the  bank  then  in  Washing¬ 
ton),  did,  however,  by  invitation  of  the  Secretary  of  the  Treasury,  attend  the 
meeting,  but  totally  dissenting  from  the  propositions  then  made,  took  no 
part  in  the  proceedings  of  the  gentlemen  present.  Mr.  Russell  was  before  the 
Committee  of  Ways  and  Means,  and  frequently  with  the  members  of  that 
Committee  and  of  the  Senate  Committee,  who  were  considering  the  matter  of 
issuing  legal  tenders,  and  stated  fully  his  own  and  the  views  of  the  Commit  _ 
tee  of  the  Bank  of  Commerce  on  that  subject,  which  were  adverse  to  such 
issues  if  other  means  could  be  realized  by  the  Government,  and  to  be  adopted 
only  in  the  exigency  of  failure  otherwise,  as  appears  to  have  been  stated  to 


58 


you  by  Mr.  Russell’s  letter  of  January  29,  and  in  the  views  lie  then  expressed 
I  believe  the  president  and  all,  or  nearly  all  of  the  directors  as  well  as  the 
committee,  concurred. 

By  the  way,  Mr.  Russell  was  a  director,  but  not  the  Vice-President  of  the 
Bank  of  Commerce — which  please  correct  in  your  publication. 

I  was,  as  you  state,  in  Washington  while  the  bill  was  pending  in  the  Senate, 
and  at  the  request  of  Mr.  Secretary  Chase,  I  appeared  before  the  Senate 
Finance  Committee  with  him  and  fully  explained  to  them  the  workings  of 
the  bank  settlements  through  the  Clearing  House,  and  the  impossibility  of 
forcing  a  circulating  medium  of  the  demand  notes  issued  by  the  Treasury, 
unless  they  were  made  a  legal  tender,  and  in  answer  to  the  enquiries  ex¬ 
pressed  my  thorough  conviction  that  the  emergency  had  arisen  requiring 
the  issue  of  legal  tenders. 

You  are  correct  in  your  supposition  regarding  my  instrumentality  in  pro¬ 
curing  the  interest  on  bonds,  Ac.,  being  made  payable  in  coin. 

I  have  shown  your  letter  and  the  pages  to  Mr.  Russell  and  to  Mr.  Kennedy, 
and  will  show  them  to  the  other  gentlemen  named. 

Yours  very  truty, 

HENRY  F.  VAIL. 


LATE  SAMUEL  NELSON. 


United  States  Supreme  Court. 

Cooperstown,  August  14,  1869. 

My  Dear  Sir: — I  received  this  morning  your  History  of  the  Legal  Tender 
act,  and  as  far  as  I  had  time  to  look  into  it,  found  what  I  knew  could  not 
be  otherwise, '  to  be  very  accurate. 

We  shall  dispose  of  this  question,  I  presume,  in  due  course  of  our  coming 
session  of  the  court,  which  begins  1st  of  October.  I  have  always  regretted 
that  the  greenbacks  were  made  a  Legal  Tender,  and  I  think  the  Chief  Justice 
now  is  of  opinion  that  the  omission  would  not  have  had  much  effect  one  way 
or  the  other,  in  its  operation  upon  the  bills.  Not  at  least  as  much  as  he 
thought  at  the  time  the  bill  was  passed.  That  the  necessities  of  the  govern¬ 
ment  and  business  interests  of  the  country  would  have  given  them  all  the 
credit,  important  or  material. 

I  am  very  much  obliged  to  you  for  this  authentic  record  of  one  of  the  most 
important  measures  growing  out  of  the  war,  and  difficult  to  deal  with  since. 

Very  truly  yours, 

Hon.  E.  G.  Spaulding. 


S.  NELSON. 


LATE  JUDGE  GRIER. 

Philadelahia,  August  26,  1869. 

Dear  Sir  : — On  my  return  home  I  am  pleased  to  find  a  copy  of  your  history 
of  the  “Legal  Tender  Paper  Money.”  It  is  a  valuable  historical  document, 
and  I  am  thankful  for  your  kindness  to  me— in  remembering  me  in  the  distri¬ 
bution  of  it,  and  concur  with  you  fully  in  the  view’s  you  take  on  the  subject. 


59 


Why  our  court  has  for  two  years  postponed  their  consideration  of  the  ques¬ 
tion,  is  unknown  to  me,  and  I  don’t  feel  any  responsibility  for  its  postpone¬ 
ment.  Excuse  my  pencil.  I  write  with  difficulty. 

Very  respectfully  and  truly,  yours  &c., 

R.  C.  GRIER, 

Hon.  E.  G.  Spaulding. 


HON.  SAMUEL  F.  MILLER, 

United  States  Supreme  Court. 

Keokuk,  August  17,  1869. 

Hon.  E.  G.  Spaulding, 

Dear  Sir: — I  received  both  your  letter  and  the  “Financial  History  of  the 
War,”  for  which  I  am  very  much  obliged  to  you. 

I  read  the  book  with  much  interest,  because  it  gives  the  first  clear  view,  as 
a  whole,  of  the  financial  measures  of  the  Government  during  the  war,  that  I 
have  had;  but  mainly  because  it  gives  an  accurate  and  full  account  of  the 
relation  of  the  Chief  Justice,  while  he  was  Secretary  of  the  Treasury,  to  those 
measures;  and  especially  to  the  legal  tender  clause,  about  which  there  was 
some  uncertainty  and  much  curiosity. 

A  careful  examination  of  all  that  is  to  be  found  in  your  book  on  that 
subject,  leaves  the  impression  on  my  mind  that  he  had  never  had  any  doubt 
as  to  the  constitutionality  of  that  measure,  but  doubted  its  policy  or  expedi¬ 
ency.  This  doubt  seems  to  have  been  entirely  removed,  and  his  conviction 
of  the  necessity  of  that  provision  to  enable  him  to  carry  on  the  department  of 
the  government  under  his  charge,  made  him  at  last  an  advocate  of  it. 

If  judicial  propriety  admitted  of  it,  I  could  not  give  you  any  reliable  opin¬ 
ion  of  the  probable  action  of  the  Supreme  Court.  Of  course  I  know  the 
views  of  some  of  its  members,  but  there  are  enough  whose  views  I  do  not 
know  (some  of  them  are  propably  undetermined  in  their  own  minds),  to 
make  the  matter  as  uncertain  to  me  as  to  you.  I  have  a  very  strong  impres¬ 
sion  that  the  opinion  of  the  majority  of  the  court,  if  rendered  while  consti¬ 
tuted  as  it  now  is,  will  be  such  as  the  Chief  Justice  shall  think  it  ought  to  be, 
when  delivered.  But  with  all  my  intimacy  with  him,  and  some  knowledge 
of  his  character  and  habits  of  thought,  I  have  no  idea  what  that  will  be.  *  * 
I  am,  very  truly,  your  friend, 

SAMUEL  F.  MILLER. 


JUDGE  BRADLEY, 

United  States  Supreme  Court. 

Washington,  April  19,  1870. 

Dear  Sir: — Hon.  D.  S.  Bennett  has  handed  me  your  book  on  the  “  Financial 
History  of  the  War.”  Accept  my  thanks  for  the  same.  It  subserves  a  very 
great  convenience  in  bringing  into  a  small  and  accessible  compass  matter  that 
would  require  days  of  search  in  the  Congressional  Globe  and  public  journals 
to  find.  Yours  very  truly, 

JOS.  P.  BRADLEY. 


Hon.  E.  G.  Spaulding. 


60 


JUDGE  NOAH  DAYIS. 

114  Broadway,  ) 
New  York,  Nov.  13,  1869.  \ 

Hon.  E.  G.  Spaulding , 

My  Dear  Sir: — If  I  have  neglected  to  acknowle  Ige  your  kindness  in  send¬ 
ing  me  a  copy  of  your  excellent  book,  it  has  been  that  I  might  write  after  a 
careful  perusal  should  enable  me  to  speak  understandingly  of  its  value.  I 
have  given  it  an  attentive  perusal,  and  while  I  thank  you  heartily  for  your 
courtesy  in  sending  it,  I  thank  you  still  more  cordially  for  your  labor  in  col 
lecting  and  publishing  it.  To  those  who  take  an  interest  in  the  subject  of 
the  currency,  the  book  is  invaluable.  I  am  glad  also  to  see  that,  while  you 
put  forth  no  claims  to  personal  credit,  yet  you  have  established  by  the  force 
of  documentary  evidence,  in  the  most  irrefragible  form,  your  own  just  claims 
to  the  merit  of  standing  foremost  amongst  the  statesmen  who  carried  on  their 
shoulders  the  soldiers  who  won  the  victories  over  the  rebellion. 

Much  is  due  to  the  army  and  to  the  heroes  who  led  it;  but  nothing  less  is 
due  to  the  heroic  statesmen  whose  sagacity  and  genius  gave  to  the  war  “the 
sinews,  without  which  the  army  would  have  striven  in  vain.” 

I  am  truly  respectfully  yours, 

NOAH  DAVIS. 

JUDGE  F.  J.  FITHIAN. 

110  Broadway,  } 
New  York,  Dec.  7,  1869,  f 

Hon.  E.  G.  Spaulding, 

Dear  Sir: — I  have  received  your  kind  note,  together  with  your  (too  brief) 
little  volume  on  the  “  Financial  History  of  the  War.”  I  have  read  it  with 
much  interest.  It  is  a  valuable  contribution  to  the  legislative  history  of  the 
country  at  a  most  important  and  critical  period.  The  idea  of  issuing  U.  S. 
treasury  notes  for  currency,  and  making  them  legal  tenders  in  payment  of 
debts,  was  in  my  opinion  the  result  of  wise  and  sagacious  statesmanship 
and  a  thorough  knowledge  of  the  character  and  resources  of  the  American 
people.  The  latter  was  undoubtedly  the  keystone  of  the  financial  arch,  and 
without  it  the  whole  structure  must  have  crumbled  in  pieces  before  the  close 
of  the  war.  Here  was  a  people  who  from  their  earliest  history  had  been 
taught  to  look  upon  a  public  debt  as  public  calamity,  scarcely  surpassed 
by  any  other.  In  times  before  they  had  been  restive  under  a  debt  of  a  hun¬ 
dred  millions;  and  now  the  necessity  was  upon  them  of  going,  no  doubt,  not 
only  by  the  hundred,  but  by  the  thousand  millions.  And  unless  some  scheme 
could  be  devised  whereby  gold  and  silver  could  be  dispensed  with  as  a  meas¬ 
ure  of  value  or  a  circulating  medium  for  cancelling  of  indebtedness,  and 
something  else  substituted  in  its  place  capable  of  being  enlarged  to  a  magni¬ 
tude  equal  to  any  emergency,  the  finances  must  have  failed.  This  substitute 
the  legal  tender  notes  gave  us.  They  it  was  that  stimulated  and  encouraged 
the  business  interests  of  the  country,  kept  up  prices,  and  afforded  ample  facilities 
for  the  prosecution  of  all  the  best  industries  consequent  upon  a  state  of  war. 
Yet  it  was  a  bold  measure  from  which,  as  you  well  know,  many  of  the  wisest 


61 


and  best  of  your  associates  shrank.  Secretary  Chase  never  gave  his  adhesion 
until  he  was  compelled  by  the  clamor  of  hungry  soldiers  to  devise  some 
way  to  get  money.  Especially  was  this  the  case  with  the  leading  men  in  the 
Republican  party  of  Democratic  antecedents — men  whose  political  opinions 
had  neen  formed  in  the  school  of  Jackson,  Van  Buren,  Wright  and  Benton. 
To  these  men  the  support  of  a  measure  making  government  paper  a  legal 
tender,  seemed  like  giving  the  lie  to  the  whole  political  record.  I  remember 
very  well  that  while  you  were  preparing  the  bill  I  had  several  conversations 
with  you  on  the  subject.  You  feared  for  the  fate  of  the  measure  in  the 
Senate.  Believing  the  measure  to  be  of  pressing  necessity,  I  desired  to  use 
whatever  influence  I  might  possess  (if  any)  in  its  favor,  and  accordingly  I 
sought  an  interview  with  the  late  Preston  King,  senator  from  this  state,  on 
the  subject.  I  found  him,  as  I  expected,  opposed  to  the  bill;  but  also  (what 
I  did  not  expect)  very  earnestly  and  bitterly  opposed  to  it.  It  seemed  to  him 
utterly  at  war  with  all  his  pronounced  opinions  on  financial  subjects.  And 
although  as  pure  and  devoted  a  patriot  as  ever  existed,  he  seemed  to  be  appar¬ 
ently  doubting  whether  the  Union  was  worth  saving  by  such  money.  He 
would  listen  to  no  argument  about  it,  and  such  as  I  ventured  to  try  made  no 
impression.  He  declared  he  would  not  consent  to  it  as  long  as  any  other  con¬ 
ceivable  means  remained  untried,  and  if  I  recollect  right,  he  did  oppose  the 
bill  to  the  last.  However,  the  measure  was  successful,  and  it  is  no  more 
than  simple  justice  to  say  what  I  personally  know  to  be  true,  that  for  its 
origin,  maturing  and  becoming  a  law,  the  country  is  indebted  to  you  more 
than  any  one  man.  Your  persistent  and  unwearied  labors,  your  complete 
and  thorough  mastery  of  the  subject,  the  respect  and  defference  with  which 
you  were  regarded  by  your  fellow  members,  securing  to  you  at  all  times  a 
friendly  and  attentive  hearing.  All  these  it  was  that  turned  the'  scale  in 
favor  of  the  bill. 

I  have  never  had  any  doubt  as  to  the  constitutionality  of  the  bill.  Ample 
authority  is  found  for  it,  not  only  in  the  grant  of  all  necessary  means  to  carry 
into  effect  the  express  powers,  but  in  three  at  least  of  the  expressly  enumer¬ 
ated  powers  of  Congress.  I  should  be  sorry  to  see  any  compromise  decision 
of  the  court,  to  the  effect  that  such  a  measure  was  constitutional  in  war  and 
not  in  peace.  If  the  power  is  there  for  any  purpose  or  time,  then  Congress 
must  be  the  exclusive  judge  as  to  the  necessity  or  propriety  of  its  excuse. 
But  this  letter  is  extending  beyond  due  limits.  Permit  me  to  say  in  conclu¬ 
sion  that  I  am  of  the  opinion  that  your  speech  on  the  presentation  of  the  bill 
was  one  among  the  very  ablest  forensic  efforts  ever  delivered  in  that  house. 
I  thought  so  then,  and  now,  on  a  careful  re-perusal  of  it,  after  what  was  then 
prophesy  has  become  history,  I  am  confirmed  in  that  opinion.  The  great 
events  and  measures  of  that  Congress,  in  which  you  bore  so  prominent  a  part, 
are  sufficient  of  themselves  to  secure  you  a  position  in  history  which  few  of 
your  countrymen  have  the  good  fortune  to  attain. 

Thanking  you  for  your  kind  expressions  towards  me  personally,  and  with 
best  regards  to  yourself  and  family, 

I  am,  very  truly  your  friend, 


F.  J.  FITHIAN. 


62 


JUDGE  HENRY  E.  DAVIES. 

New  York,  Sept.  17,  1869. 

My  Dear  Sir: — I  thank  you  for  your  courtesy  in  sending  me  a  copy  of 
your  “  Financial  History  ”  and  your  kind  remembrance  of  me.  I  have  only 
thus  far  been  able  to  read  your  opening  speech,  and  which,  in  view  of  the 
events  which  have  transpired  since  its  delivery,  was  wonderfully  prophetic 
and  eminently  sound  and  able.  I  think  you  have  demonstrated  beyond  all 
cavil  that  the  only  resource  available  to  the  Government  at  that  time,  to  enable 
it  to  support  its  armies  and  maintain  its  navy,  was  the-issue  of  treasury  notes. 
I  think  you  have  also  shown  what  was  always  clear  to  my  mind,  that  these 
notes  would  have  failed  utterly  to  have  accomplished  the  desired  purpose  if 
they  had  not  been  made  a  legal  tender.  This  brings  us  to  the  constitutional 
power  to  declare  what  shall  be  a  legal  tender.  It  is  the  conceded  attribute  of 
every  government  to  declare  what  shall  be  legal  tender — in  other  words,  what 
shall  be  the  money.  This  power  was  exercised  by  the  colonies  and  the  states 
prior  to  the  adoption  of  the  constitution  of  1789.  If  the  states  could  not  de¬ 
clare  what  they  pleased  as  legal  tenders,  then  what  sense  in  the  prohibition 
upon  them,  that  they  should  not  make  anything  but  gold  and  silver  a  legal 
tender.  So  also  the  prohibition  upon  the  states  not  to  emit  bills  of  credit.  It 
has  never  been  but  that  Congress  could  do  this,  it  follows  logically  that  it 
could  also  declare  what  should  be  a  legal. tender.  This  view  is  amplified  in 
my  opinion  in  27  New  York,  and  very  neatly  and  succinctly  stated  by  Attor¬ 
ney-General  Bates, -in  his  letter  to  you,  which  I  first  saw  in  your  book.  I 
have  no  doubt  of  the  constitutional  power  of  Congress  to  pass  the  legal  tender 
act,  and  I  think  the  United  States  Supreme  Court  will  so  hold  when  the  ques¬ 
tion  is  presented  to  them.  The  expediency  or  necessity  of  such  a  law  is  quite 
another  question.  I  have  only  looked  at  it  as  a  question  of  power,  and  your 
speech  and  subsequent  events  have  fully  satisfied  me  of  the  necessity  and 
wisdom  of  your  action.  It  saved  our  Union,  and  we  must  now  see  how  we 
can  the  most  speedily  get  back  to  a  specie  basis.  After  I  have  looked  through 
your  most  interesting  and  valuable  book,  I  will  write  you  again,  at  the  peril 
of  being  too  prolix.  Judge  Davis  would  like  a  copy,  and  is  there  any  place 
here  where  I  could  [  rocure  two  or  three  more. 

Very  cordially  yours, 

HENRY  E.  DAVIES. 

PRESIDENT  WOOLSEY, 

Yale  College. 

New  Haven,  November  29,  1869. 

Hon.  E.  G.  Spaulding , 

Dear  Sir: — I  received  your  “History  of  the  Legal  Tender  Paper  Money 
issued  during  the  great  Rebellion,”  in  due  course  of  mail,  and  beg  yon  to 
accept  my  thanks  for  the  gift.  As  a  teacher  of  political  economy  I  shall  find 
it  particularly  valuable,  and  although  I  have  had  no  time  to  do  more  than 
look  at  the  arrangement  of  topics,  I  can  see  that  it  would  have  saved  me  a 
good  deal  of  labor  if  I  had  had  it  in  my  hands  before. 


63 


It  would  be  an  idle  thing  for  me  to  make  any  observations  on  the  subject. 
I  do  not  see  how  the  Government  could  have  stood  under  its  burdens  if  it  had 
taken  a  course  materially  different  from  that  which  was  taken.  And  in 
regard  to  the  return  to  specie  payments,  I  do  not  see  how  a  decision  of  the 
Supreme  Court  against  the  constitutionality  of  the  act  in  private  bargains  can 
of  itself  bring  about  such  a  return. 

Very  respectfully  yours, 

THEODORE  WOOLSEY. 


PROF.  PERRY. 


Williams  College,  August  27,  1869. 

Hon.  E.  G.  Spaulding , 

My  Dear  Sir: — I  am  very  much  obliged  to  you  for  a  copy  of  your  book.  It 
will  be  of  essential  service  to  me,  and  to  all  others  who,  like  me,  wish  to  learn 
from  an  authentic  source  the  exact  financial  lessons  which  our  war  is  fitted 
to  teach.  I  have  begun  to  read  the  book  in  course,  am  pleased  with  it  as  far 
as  I  have  read,  but  thought  I  would  not  delay  acknowledging  it  till  I  had 
finished.  When  I  am  through  with  it,  I  will  perhaps  communicate  with  you 
again.  I  may  be  in  Buffalo  in  the  course  of  the  autumn,  and  if  so  I  shall  do 
myself  the  pleasure  of  calling  on  you. 

With  great  respect,  yours, 

A.  L.  PERRY. 


PROF.  JAMES  P.  WHITE,  M.  D. 

Buffalo,  March  10,  1870. 

Hon.  E  .G.  Spaulding, 

Dear  Sir: — Accept  my  thanks  for  a  copy  of  the  “Financial  History  of  the 
War.”  The  college  term  having  closed,  I  availed  myself  of  the  first  leisure 
moments  since  its  reception,  and  have  perused  it  with  care  and  interest.  It 
is  a  very  valuable  contribution  to  the  history  of  the  war.  This  little  volume 
furnishes  a  connected  account  of  the  financial  difficulties  encountered  in  sub¬ 
duing  the  rebellion,  and  the  manner  in  which  they  were  overcome.  Always 
aware  of  the  importance  of  the  measures  originated  and  carried  to  comple¬ 
tion  mainly  by  your  unremitted  exertions,  I  am  more  than  ever  convinced 
that  without  the  “Legal  Tender”  our  armies  could  not  have  been 
maintained  in  the  field,  and  all  our  efforts  to  preserve  the  union  by  force  must 
have  resulted  in  discomfiture.  How  helpless  would  have  been  our  patriotic 
President  and  resolute  Lieut. -General  and  his  brave  soldiers,  without  the 
necessary  “  sinews  of  war.  ”  History  will,  I  am  sure,  place  those  services 
which  preserved  the  credit  of  the  government  during  its  peril  in  the  same 
exalted  rank  with  the  more  brilliant  achievements  in  the  field  which  com. 
mand  our  admiration  and  gratitude. 

Again  thanking  you  for  the  volume  which  you  have  been  kind  enough  to 
compile,  and  which  was  certainly  a  great  desideratum. 

I  remain  ever  truly,  your  obedient  friend  and  servant, 

JAMES  P.  WHITE. 


64 


JOHN  T.  HEARD,  ESQ. 

Boston,  October  2, 1869. 

Disar  Sir: — Your  kind  letter  of  the  18th  ult.,  I  had  the  pleasure  to  receive 
in  New  York  on  the  21st.  On  that  day  also  came  to  hand  your  valuable  work, 
the  “History  of  the  Legal  Tender  Act,”  for  which  please  accept  my  thanks. 
I  have  examined  it  with  great  interest,  and  regard  it  as  an  authorative  state¬ 
ment  of  the  financial  legislation  during  the  war.  Owing  to  your  intimate 
and  prominent  connection  with  that  legislation,  no  one,  it  seems  to  me,  was 
better  qualified  to  treat  fully  and  justly  the  subject,  as  the  book  incontestably 
proves. 

The  late  gold  speculation  will  have  a  good  result  if  it  quicken  the 
public  mind  to  the  importance  of  an  early  return  to  specie  payments.  Had 
not  Congress  interfered  with  the  policy  of  contraction  of  the  late  Secretary, 
we  should  have  by  this  time  been  well  on  our  way  to  a  gold  standard.  Had 
the  new  administration  kept  its  gold  and  not  sold  any  of  it,  would  not  such 
policy  have  reduced  the  premium  ?  Would  not  such  a  course  have  brought 
us  easily  and  naturally,  (in  the  line  of  trade)  even  now,  far  on  the  road  to 
specie  payments  ? 

With  kind  regards  to  Mrs.  Spaulding  and  yourself, 

I  am  respectfully  yours, 

JOHN  T.  HEARD. 

Hon.  E.  G.  Spaulding,  Buffalo. 


c.  l.  vallandigham. 

Dayton,  Ohio,  July  17,  1869. 

Ho  it.  E.  G.  Spaulding,  Buffalo ,  N.  Y. , 

My  Dear  Sir  : — Accept  my  thanks  for  the  copy  kindly  sent  me,  of  your 
“Financial  History  of  the  War.”  It  is  an  important  and  valuable  work  for 
the  historian  and  the  student,  of  the  wonderful  times  to  which  it  relates — dis¬ 
cussing,  as  it  does,  the  problem  of  furnishing  “the  sinews”  for  the  greatest 
civil  war  of  modern  days.  How  much  military  glory  think  you,  in  any 
war,  would  be  acquired  on  land  or  sea^  by  gentlemen  of  the  army  and  navy 
at  the  front,  if  the  “ways  and  means”  were  not  first  invented  by  statesmen  in 
the  rear  ?  Here,  in  part  at  least,  cedant  arma  togae. 

I  still  think  it  was  neither  constitutional,  necessary  nor  wise  to  declare  the 
notes  a  “legal  tender.”  But  of  this  I  am  content  that  courts  and  history  shall 
judge  now. 

Yours  truly,  etc., 

C.  L.  VALLANDIGHAM. 

GEO.  H.  PENDLETON, 

Cincinnati,  Ohio,  July  15,  1869. 

Hon.  E.  G.  Spaulding ,  Buffalo , 

My  Dear  Sir: — I  have  the  honor  to  acknowledge  the  receipt  of  your  letter 
of  the  12th inst.,  and  of  the  volume  entitled  “Financial  History  of  the  War.” 


65 


For  both  I  beg  to  return  my  thanks.  I  have  not  yet  been  able  to  read  the  vol¬ 
ume,  but  I  have  no  doubt  it  will  fill  a  vacuum  which  every  student  of  our  late 
history,  and  even  many  actors  in  it,  hos  most  sensibly  felt.  Your  position 
at  the  time  gave  you  special  facilities  for  knowing  all  which  lay  beneath  the 
surface  of  the  pages  of  the  Globe  or  the  newspapers. 

Very  truly  and  respectfully, 

GEO.  H.  PENDLETON. 

HON.  Mil.  CRAWFORD. 

Columbus,  Ga.,  Sept.  16,  1860. 

My  Dear  Sir: — Allow  me  to  thank  you  for  the  “Financial  History  of  the 
War,”  as  well  as  for  your  kind  letter  accompanying  the  same,  which  I  have 
this  day  received.  Pressing  professional  engagements  will  prevent  me  from 
examining  the  book  at  present;  but  it  is  a  most  capital  idea  to  have  in  such 
concise  form  the  history  of  the  financial  legislation  of  Congress  during  the 
war.  Otherwise,  volumes  upon  volumes,  and  report  upon  report,  would  have 
to  be  searched  to  find  what  you  have  here  in  800  pages. 

I  sincerely  hope,  however,  that  “the  sinews  of  war”  may  not  be  needed 
again  very  soon,  and  that  w7e  may  be  permitted  to  repair  the  waste  places  in 
our  impoverished  land.  Hoping  that  we  may  at  some  time  meet  again  and 
renew  our  kind  personal  relations,  I  beg  to  remain, 

Very  truly  yours, 

MARTIN  J.  CRAWFORD. 

Hon.  E.  G.  Spaulding. 

PRESIDENT  GRANT’S  VETO  OF  THE  INFLATION  BILL. 

Executive  Mansion,  ) 
Washington,  April  22, 1874.  f 

To  the  Senate  of  the  United  States  : 

Herewith  I  return  Senate  bill  No.  617,  entitled  “  An  act  to  fix  the  amount 
of  United  States  notes  and  the  circulation  of  national  bank  notes,  and  for 
other  purposes,”  without  my  approval.  In  doing  so  I  must  express  my  regret 
at  not  being  able  to  give  my  assent  to  the  measure  which  has  received  the 
sanction  of  a  majority  of  the  legislators  chosen  by  the  people  to  make  laws  for 
their  guidance,  and  I  have  studiously  sought  to  find  sufficient  arguments  to 
justifiy  such  an  assent,  but  unsuccessfully.  Practically,  it  is  a  question 
whether  the  measure  under  discussion  would  give  an  additional  dollar  to  the 
irredeemable  paper  currency  of  the  country  or  not;  and  whether,  by  acquir¬ 
ing  three-fourths  of  the  reserves  to  be  retained  by  the  banks,  and  prohibiting 
interest  to  be  received  on  the  balance,  it  might  not  prove  a  contraction.  But 
the  fact  cannot  be  concealed  that  theoretically  the  bill  increases  the  paper 
circulation  one  hundred  million  of  dollars,  less  only  the  amount  of  the  reserves 
restrained  from  circulation  by  the  provisions  of  the  second  section. 

The  measure  has  been  supported  on  the  theory  that  it  would  give  an  in¬ 
creased  circulation.  It  is  a  fair  inference,  therefore,  that  if  in  practice  the 
measure  should  fail  to  create  the  abundance  of  circulation  expected,  the 
friends  of  the  measure,  particularly  those  out  of  Congress,  would  clamor  for 


66 


such  inflation  as  would  give  the  expected  relief.  The  theory,  in  my  belief,  is 
a  departure  from  the  true  principles  of  finance,  the  national  interest,  national 
obligation  to  creditors,  congressional  promises,  party  pledges  on  the  part  of 
both  political  parties,  and  of  the  personal  views  and  promises  made  by  me  in 
every  annual  message  sent  to  Congress,  and  in  each  inaugural  address. 

In  my  annual  message  to  Congress  in  December,  1869,  the  following  pas¬ 
sage  appears  : 

“  Among  the  evils  growing  out  of  the  rebellion  and  not  yet  referred  to,  is  that 
of  an  irredeemable  currency.  It  is  an  evil  which  I  hope  will  receive  your  most 
earnest  attention.  It  is  the  duty,  and  one  the  highest  duties  of  the  govern¬ 
ment,  to  secure  to  its  citizens  a  medium  of  exchange  of  a  fixed,  unvarying 
value.  This  implies  a  return  to  a  specie  basis,  and  no  substitute  for  it  can  be 
devised.  It  should  be  commenced  now  and  reached  at  the  earliest  practicable 
moment  consistent  with  a  fair  regard  to  the  interest  of  the  debtor  class.  Im¬ 
mediate  resumption,  if  practicable,  would  not  be  desirable.  It  would  compel 
the  debter  class  to  pay  beyond  their  contracts  the  premium  on  gold  at  the 
date  of  their  purchase,  and  would  bring  bankruptcy  and  ruin  to  thousands. 
The  fluctuations,  however,  in  the  paper  value  of  the  measure  of  all  values — 
gold — is  detrimental  to  the  interest  of  trade.  It  makes  the  man  of  business 
an  involuntary  gambler,  for  in  all  sales  where  future  payment  is  to  be  made 
both  parties  speculate  as  to  what  will  be  the  value  of  the  currency  to  be  paid 
and  received.  I  earnestly  recommend  to  you,  then,  such  legislation  as  will 
insure  the  gradual  return  to  specie  payments,  and  put  an  immediate  stop  to 
the  fluctuations  in  the  value  of  the  currency.” 

I  still  adhere  to  the  views  then  expressed.  As  early  as  December  4,  1865, 
the  House  of  Representatives  passed  resolutions,  by  a  vote  of  144  yeas  to  6 
nays,  concurring  in  the  views  of  the  Secretary  of  the  Treasury  in  relation  to 
the  necessity  of  contracting  the  currency  with  a  view  to  as  early  a  resumption 
of  specie  payments  as  the  business  interests  of  the  country  will  permit,  and 
pledging  co-operative  action  to  this  end  as  speedily  as  possible. 

The  first  act  passed  by  the  Forty-first  Congress,  on  the  eighteenth  day  of 
March,  1869,  was  as  follows: 

“  An  act  to  strengthen  the  public  credit  of  the  United  States  : 

“  Be  it  enacted,  etc.,  That  in  order  to  remove  any  doubt  as  to  the  purpose  of 
the  government  to  discharge  all  its  obligations  to  public  creditors,  ,and  to  set¬ 
tle  conflicting  questions  and  interpretations  of  law,  by  virtue  of  which  such 
obligations  have  been  contracted,  it  is  hereby  provided  and  declared  that  the 
faith  of  the  United  States  is  solemnly  pledged  to  the  payment  in  coin,  or  its 
equivalent,  of  all  obligations  of  the  United  States,  and  of  all  interest-bearing 
obligations,  except  in  cases  where  the  law  authorizing  the  issue  of  any  such 
obligations  has  expressly  provided  that  the  same  may  be  paid  in  lawful 
money,  or  in  other  currency  than  gold  or  silver;  but  none  of  said  interest- 
bearing  obligations  not  already  due  shall  be  redeemed  or  paid  before  maturity, 
unless  at  such  times  as  the  United  States  notes  shall  be  convertible  into  coin 
at  the  option  of  the  holder,  or  unless  at  such  time  the  bonds  of  the  United 
States  bearing  a  lower  rate  of  interest  than  the  bonds  to  be  redeemed  can  be 
sold  at  par  in  coin.  The  United  States  also  solemnly  pledges  its  faith  to 
make  provision,  at  the  earliest  practicable  period,  for  the  redemption  of  United 
States  notes  in  coin. 

This  act  still  remains  as  a  continuing  pledge  of  the  ^iith  of  the  United 
States  to  make  provision,  at  the  earliest  practicable  moment,  for  the  redemp¬ 
tion  of  United  States  in  coin.  The  declaration  contained  in  the  act  of  June 
20, 1864,  created  an  obligation  that  the  total  amount  of  United  States  notes 
issued  or  to  be  issued  should  never  exceed  four  hundred  millions  of  dollars. 
The  amount  of  actual  circulation  was  actually  reduced  to  three  hundred  and 


67 


fifty-six  millions  of  dollars,  at  which  point  Congress  passed  the  act  of  Feb¬ 
ruary  4,  1868,  suspending  the  further  reduction  of  the  currency.  Forty-four 
millions  have  even  been  regarded  as  a  reserve,  to  be  used  only  in  case  of 
an  emergency  such  as  has  occurred  on  several  occasions,  and  must  occur  when 
from  any  cause  the  revenues  suddenly  fall  below  the  expenditures,  and  such 
reserve  is  necessary,  because  fractional  currency  amounting  to  fifty  millions  is 
redeemable  in  legal  tender  on  call.  It  may  be  said  that  such  a  return  of 
fractional  currency  is  impossible,  but  let  steps  be  taken  for  a  return  to  a  specie 
basis  and  it  will  be  found  that  silver  will  take  the  place  of  fractional  cur¬ 
rency  as  rapidly  as  it  can  be  supplied. 

When  the  premium  on  gold  reaches  a  sufficiently  low  point,  with  the 
amount  of  United  States  notes  to  be  issued  permanently  within  proper  limits* 
and  the  treasury  is  so  strengthened  as  to  be  able  to  redeem  them  in  coin  on 
demand,  it  will  then  be  safe  to  inaugurate  a  system  of  free  banking,  with  such 
provisions  as  to  make  the  compulsory  redemption  of  the  circulating  notes  of 
banks  in  coin,  or  United  States  notes  themselves  redeemable  and  made  equiv¬ 
alent  to  coin,  as  a  measure  preparatory  to  free  banking,  or  for  placing  the 
government  in  a  position  to  redeem  its  notes  in  coin  at  the  earliest  practica¬ 
ble  moment.  The  revenues  of  the  country  should  be  increased  so  as  to  pay 
the  current  expenses,  provide  for  a  sinking  fund  required  by  law,  and  also  a 
surplus  to  be  retained  in  the  treasury  in  gold. 

I  am  not  a  believer  in  any  artificial  method  of  making  paper  money  equal 
to  coin,  when  coin  is  not  owned  or  held  ready  to  redeem  the  promises  to  pay, 
for  paper  money  is  nothing  more  than  promises  to  pay,  and  is  valuable  ex¬ 
actly  in  proportion  to  the  amount  of  coin  it  can  be  converted  into.  When 
coin  is  not  used  as  the  circulating  medium,  or  the  currency  of  the  country  is 
not  covertible  into  it  at  par,  it  becomes  an  article  of  commerce  as  much  as 
any  other  produce.  The  surplus  will  seek  a  foreign  market,  as  will  any  other 
surplus.  The  balance  of  trade  has  nothing  to  do  with  the  question.  The  duties 
on  imports  being  required  in  gold,  and  about  enough  to  satisfy  that  demand 
remains  in  the  country.  To  increase  this  supply  I  see  no  way  open  but  by 
the  government  hoarding,  through  the  means  above  given,  and  possibly  by 
requiring  national  banks  to  aid. 

It  is  claimed,  by  the  advocates  of  the  measure  herewith  returned,  that  there 
is  an  unequal  distribution  of  the  banking  capital  of  the  country.  I  was  dis¬ 
posed  to  give  great  weight  to  this  view  of  the  question  at  first,  but  on  reflec¬ 
tion  it  will  be  remembered  that  there  still  remains  $4,000,000  of  authorized 
bank-note  circulation  assigned  the  states  having  less  than  quota  not  yet  taken. 
In  addition  to  this  the  states  having  less  than  their  quota  of  bank  circulation 
have  the  option  of  $25,000,000  more  to  be  taken  from  those  states  having 
more  than  their  proportion.  When  this  is  all  taken  up,  or  when  specie  pay¬ 
ments  are  fully  restored  or  are  in  rapid  process  of  restoration,  it  will  be  time 
to  consider  the  question  of  more  currency. 


U.  S.  GRAJSTT. 


63 


HON.  T.  O.  HOWE. 

Green  Bay,  Sept.  13,  1869. 

My  Dear  Sir: — I  give  you  many  thanks  for  sending  me  a  copy  of  your 
“  Financial  History  of  the  War.”  But  I  give  you  more  thanks  for  publishing 
the  work  itself. 

Last  winter  I  became  painfully  aware  of  the  want  of  such  a  work.  I  at¬ 
tempted  to  prepare  a  speech  upon  our  financial  condition.  Upon  looking 
around  I  could  find  no  account  of  the  financial  measures  resorted  to  during 
the  war  save  in  the  statutes  and  the  Globe. 

Mining  in  those  mountains  was  so  tedious  that  my  speech  was  not  prepared 
until  all  debate  to  which  it  was  pertinent  had  been  closed. 

The  book  came  to  hand  this  morning.  Of  course  I  have  only  looked  to 
see  its  contents,  and  have  not  read  those  contents.  That  I  shall  do  hereafter, 
and  I  am  sure  I  shall  read  not  only  with  interest  but  with  gratitude. 

I  remember  the  leading  ideas  argued  in  my  speech  upon  the  legal  tender 
act,  to  which  you  refer  in  terms  of  compliment.  If  I  were  to  make  the  speech 
under  like  circumstances,  but  with  the  light  of  all  the  experience  we  have 
since  had,  I  do  not  know  wherein  1  should  wish  to  change  it. 

I  thought  we  should  resort  to  a  paper  circulation  because  we  could  not 
command  coin — that  the  Government  should  make  the  paper  because  it  could 
make  safer  paper  than  the  banks — that  it  should  make  the  capitalist  take 
them  because  we  made  the  soldier  take  them — that  this  circulation  should  be 
in  the  form  of  promises  to  pay,  because  within  the  usual  form,  but  not  to  pay 
on  demand  because  we  know  we  could  not  pay  on  demand — that  we  never 
should  make  a  dollar  of  paper  when  we  could  borrow  a  dollar  at  a  tair  rate 
of  interest — we  should  stand  ready  to  take  in  exchange  for  notes  that  did 
draw  interest.  The  great  mistake  of  our  time,  I  think,  was  when  we  refused 
to  make  our  notes  convertible  into  bonds. 

Very  truly  yours, 

T.  O.  HOWE. 

Hon.  E.  G.  Sraulding. 


HON.  O.  P.  MORTON. 

Indianapolis,  Aug.  28,  1869. 

Hon.  E.  G.  Spaulding , 

Dear  Sir: — I  received  your  letter  containing  your  speech  and  accompanied 
by  your  book,  for  which  please  accept  my  thanks.  I  regard  them  as  very 
valuable,  and  your  book  will  be  very  useful  in  enabling  politicians  to  make 
an  accurate  study  of  the  financial  question.  The  ultimate  redemption  or  pro¬ 
posal  to  redeem  the  greenbacks  is  the  true  way  to  resumption,  and  for  that 
purpose  a  larger  revenue  of  gold  is  necessary.  This  was  the  burden  of  my 
speech  and  of  my  bill  last  winter. 

While  I  regard  Schenk’s  “  bill  to  strengthen  the  public  credit,”  as  a  misfor¬ 
tune,  yet  the  clause  which  pledges  the  faith  of  the  Government  to  make  pro¬ 
vision  at  the  earliest  practicable  period  for  the  redemption  of  the  greenbacks 
in  coin,  was  an  amendment  which  I  proposed  in  the  Conference  Committee 


on  tlie  bill  which  Johnson  pocketed.  The  bill  finally  passed  was  a  copy  of 
that.  Preparation  to  resume  specie  payment  is  in  my  opinion  the  first  great 
duty  of  the  Government. 

I  dissent  from  you  reluctantly  on  one  point — reference  to  the  repeal  of 
the  clause  authorizing  the  conversion  of  greenbacks  into  Five-Twenties. 
That  repeal  was  indispensible  to  the  sale  of  the  bonds.  Capitalists  would  not 
buy  bonds  at  par,  which  could  not  by  any  possibility  get  above  par.  As 
long  as  the  people  could  take  their  greenbacks  and  convert  them  into  bonds 
at  par,  the  bonds  would  not  get  above  par  in  the  market.  The  two  things 
were  of  unequal  value  inherently,  and  could  not  both  be  kept  afloat  at  the 
same  time  if  convertible. 

If  the  bonds  appreciated,  the  greenbacks  would  be  converted  and  pass  out 
of  circulation,  and  as  a  circulation  was  necessary  more  would  have  to  be 
i  issued,  and  the  effect  would  be  to  drag  down  the  bonds,  because  these  in  turn 
would  be  convertible,  and  so  on.  The  provision  of  convertibility  I  always 
:  regarded  as  impracticable.  If  the  conversion  was  not  made  it  was  because 
the  bonds  were  depreciated  and  would  not  sell  at  par.  If  they  were  con¬ 
verted  the  purpose  of  a  circulation  was  defeated  unless  they  were  constantly 
renewed. 

I  would  write  more  at  length  if  I  had  time. 

I  am  very  truly  yours, 

O.  P.  MORTON. 


HON.  R.  E.  FENTON. 

Committee  of  Finance,  U.  S.  Senate,  ) 
Washington,  May  7,1870.  ) 

My  Dear  Sir: — I  owe  you  an  apology  for  my  delay  in  acknowledging  the 
i  receipt  of  y our  “  Financial  History  of  the  War.”  The  truth  is,  I  have  been  so 
much  occupied  that  I  have  not  until  the  last  few  days,  examined  it.  My 
official  connections  with  the  Congress  during  the  time  embraced  in  your 
work,  enables  me  to  speak  of  its  accuracy  and  value.  And  as  relating  to  ex¬ 
traordinary  and  necessary  legislation  to  sustain  the  Government  during  the 
years  of  its  great  trial ,  it  will  be  hereafter,  as  well  as  now,  a  convenient  and 
well  received  authority.  Yery  truly  yours, 

R.  E.  FENTON. 

Hon.  E.  G.  Spaulding. 


HON.  CARL  SCHURZ, 

Late  Senator. 


St.  Louis,  Mo.,  Sept,  25,  1869. 

Dear  Sir:— I  have  received  the  copy  of  the  “Financial  History  of  the 
War,”  which  you  had  the  kindness  to  forward  to  me.  The  work  is  a  very 
meritorious  one,  and  you  have  obliged  me  very  much  by  sending  it  to  me. 

Yery  truly  yours, 

C.  SCHURZ. 

Hon.  E.  G.  Spaulding. 


70 


POINTS  MADE  BY  SENATOR  SCHURZ,  IN  HIS  SPEECH  IN  JANUARY,  1874. 

“1.  The  government  of  the  United  States  is  in  law  and  honor  bound  to 
pay  the  debt  incurred  by  the  issue  of  its  promises  to  pay,  as  soon  as  by  its 
own  action  it  can  render  itself  able  to  pay. 

“  2.  When,  under  circumstances  like  ours,  an  irredeemable  paper  currency 
is  constantly  depreciated,  at  a  discount  as  to  coin,  that  depreciation  proves 
that  its  volume  is  in  excess  of  the  real  wants  of  the  general  business  of  the 
country.  This  being  the  case  with  our  paper  currency,  the  present  crisis 
cannot  have  been  caused  by  any  insufficiency  of  that  currency  as  to  the  real 
requirements  of  business. 

“  3.  While  a  sudden  fright  or  panic,  showing  itself  in  runs  upon  banks, 
Ac.,  may  under  certain  circumstances  be  momentarily  checked  by  an  addi¬ 
tional  issue  of  currency — a  stage  of  affairs  which  lies  several  months  behind 
us — a  crisis  caused  by  the  unproductive  consumption  of  capital  and  overspec¬ 
ulation,  cannot  be  remedied  by  an  addition  to  an  already  redundant  paper 
currency. 

“4.  The  proposition  that  the  Government  may,  without  the  most  pressing 
necessities,  springing  from  extreme  public  danger,  issue  any  additional 
amounts  of  irredeemable  paper  currency  at  its  arbitrary  discretion,  merdly  to 
exercise  a  certain  influence  upon  the  business  of  the  country,  tends  to  create 
a  system  which  will  place  all  the  private  fortunes  of  the  city  at  the  mercy  of 
the  Government. 

“6.  A  currency,  which  to  the  vice  of  inconvertibility  adds  the  vice  of 
redundancy,  has  always  had,  and  must  naturally  have,  the  effect  of  stimulat¬ 
ing  over-speculation,  and  gambling;  of  diverting  the  energies  of  the  people 
from  honest,  productive  labor;  of  leading  to  the  unproductive  consump¬ 
tion  of  capital  and  the  creation  of  fictitious  values  ;  of  naturally  ex¬ 
panding  the  system  of  credit  ;  of  demoralizing  business  as  well  as  social  life  ; 
and  thus  of  seriously  aggravating  the  causes  which  produce  the  general 
break-down  at  once. 

“6.  The  further  expansion  of  such  a  currency,  during  or  after  a  crisis,  can 
only  revive  and  stimulate  anew  the  influences  which  have  already  demoral¬ 
ized  business  and  brought  forth  crops  of  disaster. 

“7.  An  addition  to  such  currency  does  not  only  not  add  to  the  wealth  of 
the  country,  but  does  not  increase  the  efficiency  of  the  currency  itself  as  a 
means  of  exchange,  for  the  reason  that  it  drives  up  prices,  and  by  stimulating 
speculation  causes  its  being  drawn  away  from  the  legitimate  business  of  tbe 
country  to  the  centres  of  speculation.  It  will  not  make,  permanently,  money 
easy,  but  rather  raise  than  reduce  the  current  rates  of  interest. 

“8.  For  the  same  reason  every  addition  to  such  currency  will  not  satisfy,  but 
excite  the  demand  for  more  and  more,  and  thus  push  the  country  forward  on 
the  road  to  bankruptcy  and  repudiation. 

“9.  No  legitimate  economic  interest  of  the  country  will,  therefore,  be  per¬ 
manently  benefitted  by  such  expansion,  but  all  will  be  injured. 

“10  Least  of  all  is  the  agricultural  interest  benefitted  by  our  irredeemable 
and  redundant  currency.  It  is,  on  the  contrary,  most  grieviously  injured  by 


71 


it,  because  the  farmer  must  pay  extravagant  prices  for  all  he  has  to  buy, 
while  the  prices  of  the  principal  products  he  has  to  sell  are  regulated  by  a 
foreign  market  untouched  by  our  home  inflation,  and  controlled  by  the  com¬ 
petition  of  the  world. 

“11.  These  evils  will  be  increased  by  every  further  expansion  and  conse¬ 
quent  depreciation  of  the  currency,  and  the  idea  that  the  agricultural  interest 
and  those  sections  of  the  country — the  west  and  the  south — whose  prosperity 
depends  on  a  profitable  cultivation  of  the  soil,  can  be  readily  benefitted  by 
further  expansion,  is  therefore  fallacious  in  the  highest  degree. 

“12.  On  the  other  hand,  the  agricultural  interest  will  be  vastly  benefitted 
by  an  early  return  to  specie  payments,  because  resumption  will  greatly  reduce 
the  price  of  the  commodities  the  farmer  has  to  buy,  while  it  will  notin  a  pro¬ 
portion,  reduce  the  price  of  the  principal  products  he  has  to  sell,  thus  adding 
greatly  to  the  purchasing  power  of  his  income. 

“  13.  The  idea  that  the  return  to  specie  payments  can  be  facilitated  by  that 
sort  of  prosperity  which  would  be  brought  forth  by  further  inflation  involves 
a  mischievous  fallacy.  Further  inflation  would  only  revive  and  stimulate  all 
the  evil  influences  of  a  redundant  irredeemable  currency  upon  all  economic 
movements,  again  excite  over-speculation,  promote  excessive  importations, 
thus  turning  and  keeping  trade  balance  against  us;  again  expand  the  credit 
system  to  the  bursting  point,  and  lead  to  new  and  more  disastrous  revulsions. 

“  14.  Such  expansion  would  render  impossible  the  fulfilment  of  the  condi¬ 
tions  which  must  precede  the  resumption  of  specie  payments  ;  retrenchment 
and  economy  in  public  and  private  affairs,  contraction  of  the  credit  system 
and  of  private  indebtedness,  prudent  management  of  business,  &c. 

“  15.  The  idea  that  the  return  to  specie  payments  can  in  the  safest  way  be 
brought  about  by  doing  nothing  and  waiting  until  the  development  of  the 
resources  of  the  country  and  the  growth  of  business  have  brought  our  paper 
money  and  gold  to  a  par  in  commercial  value  is  equally  fallacious,  for  the 
reason  that  the  period  of  relief  thus  vaguely  pointed  out  lies  in  an  undefined 
and  un definable  future;  that  in  the  meantime  all  the  demoralizing  and  dan¬ 
gerous  influences  of  our  irredeemable  and  redundant  currency  remain  at  work 
with  undiminished  vigor  and  activity;  that  there  will  be  continued  danger  of 
further  inflation  being  forced  upon  us  by  agencies  beyond  our  control,  as  the 
government  at  the  present  moment  is  already  expanding  the  currency;  that 
thus  the  day  of  promise  is  put  off  further  and  further,  and  that  the  very  dif¬ 
ficulties  and  disasters  which  the  advocates  of  the  do-nothing  policy  fear  will 
spring  from  legislative  action  in  the  direction  of  specie  payments  will  natur¬ 
ally  occur,  and  have  in  fact  occurred,  under  the  do-nothing  policy  itself,  as 
recent  events  have  clearly  demonstrated. 

“16.  The  resumption  of  specie  payments  cannot  surely  be  brought  on  but 
by  legislative  action  ;  and  no  more  propitious  moment  can  be  found  for  the 
inauguration  of  a  resumption  policy  than  the  present,  for  the  reason  that 
much  of  the  work  of  preparation  which  must  precede  resumption  has  already 
been  done  by  the  crisis.  Private  indebtedness  has  been  greatly  reduced; 
credit  in  business  transactions  has  been  largely  contracted;  the  prices  of  c  om- 


72 


modities  have  already  declined  to  a  low  point;  business  men  have  generally 
but  light  stocks  on  hand,  and  for  months  have  been  circumspect  in  their  op¬ 
erations.  The  possibility  of  loss  through  the  appreciation  of  the  current 
money  or  the  decline  of  prices  will  therefore  be  now  as  little  as  we  ever  can 
expect  it  to  be.” 


HON.  B.  W.  LEAVENWORTH 

Syracuse,  Oct  31,  1869. 

Hon.  E.  G.  Spaulding , 

My  Dear  Sir: — On  my  return  from  New  York,  last  evening,  I  found  your 
letter  of  the  26th,  and  also  your  work  on  our  finances  as  affected  by  our  legis¬ 
lation  in  the  early  years  of  the  rebellion.  I  have,  of  course,  as  yet  only  given 
it  a  very  hasty  examination,  but  it  is  sufficient  to  perceive  that  you  have 
made  a  most  valuable  contribution  to  the  history  of  the  country  during  that 
most  eventful  period.  And  what  greatly  enhances  its  value  is  the  fact  that, 
while  its  importance  cannot  be  overlooked  or  gravely  over-estimated,  it  has 
been  almost  ignored  by  all  the  various  historians  of  the  great  rebellion.  Your 
position  in  Congress,  and  the  part  you  took  in  the  great  financial  questions  of 
the  day,  your  familiarity  with  the  whole  subject,  and  your  tastes,  all  pecu¬ 
liarly  fitted  you  for  this  important  work,  and  you  seem  to  have  exhausted 
the  subject.  I  hope,  in  justice  to  yourself  and  also  for  the  general  good, 
that  you  will  see  that  a  copy  of  the  work  is  put  in  most  of  the  important 
libraries  of  the  country,  for  the  future  benefit  of  the  historians  of  that  period- 
There  are  great  lessons  to  be  learned  from  our  experience,  and  the  “almighty 
dollar  ”  is  the  great  power,  without  which  campaigns  are  never  successful. 
Thanking  you  for  your  kind  remembrance,  I  remain, 

Most  truly  yours, 

E.  W.  LEAVENWORTH. 


HON.  D.  A.  WELLS. 

Treasury  Department,  ) 
Washington,  Sept.  25, 1869.  ) 

Hon.  E.  G.  Spaulding , 

My  Dear  Sir: — When  in  Boston  last  week  I  saw  for  the  first  time  a  copy 
of  your  “Financial  History  of  the  War,”  and  was  intending  to  order  it  imme¬ 
diately  on  my  return  home,  when  your  letter  and  the  book  in  question  ar¬ 
rived.  I  have  not  had  time  to  more  than  glance  at  its  contents;  I  know, 
however,  that  it  supplies  an  important  element  of  our  recent  history,  and  that 
the  work  has  been  well  done.  Please  receive  my  thanks  for  your  kind  re¬ 
membrance.  I  have  thus  far  read  everything  that  you  have  published  that  I 
have  seen,  and  agree  with  you  fully  upon  all  matters,  with  a  single  exception, 
and  that  is  this: 

I  do  not  believe  that  with  the  present  volume  of  currency,  and  the  conse¬ 
quent  maintenance  of  abnormal  prices,  that  resumption  of  specie  payments 
is  practicable  by  any  method.  I  do  not  believe  that  any  legal  enactment 
compelling  the  Treasury  or  the  banks  to  retain  and  accumulate  gold  will 
produce  a  sufficient  sum  to  meet  redemption,  or  that  gold  could  be  kept  here 


73 


for  any  length  of  time  after  redemption  had  been  commenced,  on  any  basis  of 
accumulation.  If  you,  in  conjunction  with  your  ideas  of  accumulating  gold, 
will  advocate  a  measure  of  contraction,  I  am  with  you,  heart  and  hand. 

Have  you  read  a  recent  work  by  Bonamy  Price,  professor  of  political 
economy  at  Oxford,  Eng.,  entitled  “  Principles  of  Currency  ?  ”  If  not,  allow 
me  to  recommend  it  to  you  as  worthy  of  perusal,  although  I  do  not  fully 
agree  with  all  the  propositions  contained  in  it. 

I  do  not  know  how  valuable  a  report  I  can  get  up  for  this  year.  I  some¬ 
times  feel  almost  discouraged,  as  the  results  of  investigation  are  so  para¬ 
doxical  and  unsatisfactory.  It  sometimes  seems  to  me  that  the  more  I 
investigate  and  discuss  these  matters  the  less  I  know;  but,  at  the  same 
time,  I  have  an  abiding  confidence  that  we  shall  in  the  end  manage  to  strug¬ 
gle  through  all  our  difficulties,  but  perhaps  at  the  cost  of  a  sad  experience. 
Trusting  that  I  may  have,  at  no  distant  day,  the  pleasure  of  a  personal  inter¬ 
view,  I  remain,  yours  very  truly, 

DAYID  A.  WELLS. 


HON.  AMASA  WALKER. 

North  Brookfield,  Sept.  1,  1869. 

Hon.  E.  G.  Spaulding, 

Dear  Sir  : — Yours  of  the  26th  is  just  at  hand,  and  I  have  also  the  pleasure 
to  acknowledge  the  receipt  of  your  “  History  of  the  Legal  Tender  Paper 
Money  issued  during  the  great  Rebellion.”  I  have  glanced  at  it  sufficiently 
to  see  that  it  is  a  valuable  contribution  to  our  financial  literature — a  work 
that  will  be  found  very  convenient  and  useful  for  reference  in  the  future.  I 
am  much  obliged  to  you  for  it,  and  shall  peruse  it  at  my  leisure.  I  arrived 
at  home,  from  my  summer’s  tour  to  the  Gulf  of  St.  Lawrence,  last  evening, 
so  that  at  present  I  am  much  occupied. 

I  am  glad  you  took  so  strong  ground  in  your  letter  to  Mr.  McCulloch  in 
favor  of  restoring  the  currency  to  par  with  gold.  It  is,  by  far,  the  most 
serious  matter  now  before  the  nation.  What  the  action  of  Congress,  at  its 
next  session,  will  be,  no  one  can  predict.  There  will  be  a  strong  effort  to 
further  inflate,  and  if  that  cannot  be  done,  then  to  hold  on  to  the  present 
amount  of  currency.  I  think,  with  you,  that  the  intervention  of  the  Supreme 
Court  may  be  the  only  way  in  which  the  country  can  be  relieved;  and,  unde¬ 
sirable  as  that  mode  of  relief  is,  it  will  be  far  better  than  to  float  on  under 
our  depreciated  monetary  system. 

I  shall  ever  be  ready  to  afford  any  assistance  in  my  power  toward  securing 
a  gradual  but  efficient  contraction  of  the  circulating  medium.  I  don’t  know 
whether  you  saw  my  plan,  proposed  last  winter,  of  withdrawing  the  green¬ 
backs  by  issuing  compound  interest  notes  instead;  if  so,  I  should  like  to  know 
how  it  strikes  you.  I  am,  yours  truly, 


AMASA  WALKER. 


74 


HON.  ALEXANDER  H.  RICE. 

# 

Boston,  Oct.  27, 18G9 

Hon.  E.  G.  Spaulding ,  Buffalo ,  N.  T. 

My  Dear  Sir: — I  am  very  glad  to  possess  the  volume  received  from  you 
this  morning,  and  thank  you  for  sending  it  to  me.  I  have  not  yet  had  time 
to  more  than  glance  at  its  contents,  but  I  know  that  no  one  is  more  competent 
than  you  are  to  treat  the  subject  intelligently  and  exhaustively. 

I  am,  dear  sir,  yours  very  truly, 

ALEX.  H.  RICE. 


MAJOR-GENERAL  SHERMAN. 

War  Department,  '/ 
Washington,  Oct.  12,  1869.  j 

Dear  Sir: — With  many  thanks  for  your  kindness  in  sending  it,  I  beg  to 
acknowledge  the  receipt  of  a  copy  of  your  lately-issued  “  History  of  the  Legal 
Tenders.”  I  have  not  been  able  to  more  than  glance  through  it  here,  but 
have  sent  it  down  to  my  house,  where  I  can  read  it  more  leisurely. 

In  answer  to  your  request  for  my  views  upon  the  work,  I  can  only  say 
now,  that  the  magnitude  of  the  subject,  and  its  importance  to  the  future,  cer¬ 
tainly  warranted,  if  it  did  not  actually  demand,  its  publication ;  and  it  is 
equally  certain,  from  your  known  connection  with  the  measure  from  its 
inception  to  its  final  adoption,  that  you  were  the  one  to  collect,  prepare  and 
send  forth  its  history.  Very  truly  yours, 

W.  T.  SHERMAN, 

Gen’i  and  Sec’y  of  War. 

Hon.  E.  (>.  Spaulding,  Buffalo,  N.  Y. 

GENERAL  BUTLER. 

Bay  View,  near  ) 
Gloucester,  Aug,  17,  1869.  f 

Dear  Sir: — I  have  the  honor  to  acknowledge  the  receipt  of  your  “  Finan¬ 
cial  History  of  the  War,”  which  I  intend  to  examine  with  the  care  its  merits 
require.  I  think  it  will  fill  a  need  in  the  financial  history  of  the  country. 
There  can  be  no  more  abstruse  problem  than  our  present  financial  relations, 
and  anything  which  shall  show  the  origin  of  our  present  system,  so  as  to 
elucidate  the  principles  upon  which  it  operates,  will  be  a  benefit  to  the 
country.  With  many  thanks  for  your  courtesy, 

I  am,  yours  truly, 

BENJ.  F.  BUTLER. 

Hon.  E.  G.  Spaulding,  Buffalo,  N.  Y. 

HON.  JAMES  A.  GARFIELD. 

Washington,  D.  C.,  June  5th,  1869. 

Hon.  E.  G.  Spaulding ,  Buffalo ,  JST.  7. 

Dear  Sir: — Yours  of  the  first,  together  with  your  “  Financial  History  of 
the  War,”  came  duly  to  hand.  Please  accept  ray  thanks  for  your  kind  con- 


75 


sideration.  I  know  of  no  man  so  well  fitted  as  yourself  to  write  that  historjr, 
and  I  am  delighted  that  you  have  performed  what  I  am  sure,  with  your  sound 
views  on  the  subject,  will  prove  a  service  to  the  whole  country  in  the  work 
you  have  accomplished. 

Very  truly  yours, 

J.  A.  GARFIELD. 


HON.  EDWARD  HAIGHT, 

The  only  Democrat  in  the  House  who  voted  for  the  Legal  Tender  Act. 

Bank  of  the  Commonwealth,  ) 
Hew  York,  Oct.  29, 1859.  j 

Eon.  E.  0.  Spaulding,  Buffalo ,  N.  T. 

Dear  Sir: — Some  time  has  elapsed,  and  more  than  I  intended  there  should, 
between  the  receipt  of  your  book  and  its  acknowledgment;  allow  me  first  to 
thank  you  for  it,  and  then  to  say  that  having  examined  it  carefully,  I  regard 
it  as  a  most  valuable  manual  of  the  financial  events  of  the  War — events  that 
have  culminated  in  a  gladdening  peace,  and  that  are  yet  to  exert  an  influence 
upon  the  monetary  affairs  of  our  own  country — and  perchance  of  the  world 
— most  useful  and  salutary  or  most  mischievous  and  pernicious,  according  as 
wisdom  or  folly  may  most  prevail  in  our  councils. 

Highly  as  those  of  us  who  participated  in  the  financial  events  of  the  war, 
must  regard  your  book  to  the  future  historian,  who  will  be  called  to  weave 
them  into  a  narrative  of  the  deepest  interest  to  future  generations ;  it  will  be 
more  than  doubly  valuable.  Sincerely  congratulating  you  therefore,  and  re- 
newedly  thanking  you  for  my  copy,  I  remain  with  the  highest  respect, 

Yours  very  truty, 

EDWARD  HAIGHT. 


HON.  J.  O.  PUTNAM. 

Buffalo, 'June  26,  1869. 

My  Dear  Sir: — I  thank  you  for  your  volume  vindicating  the  “Truth  of 
History.”  It  is  not  a  new  idea  to  me,  that  to  you  is  attributable,  in  a  very 
large  measure,  the  adoption  of  the  “Legal  Tender  System”  of  our  War 
Finance.  You  have  rendered  a  valuable  service,  and  your  book  will  always 
be  an  authority  on  the  subject  of  which  its  treats,  and  which  it  seems  to  me 
to  exhaust. 

It  is  a  rare  distinction  to  be  so  identified  as  are  you  with  that  pclic}'-,  with¬ 
out  which  the  late  struggle  of  the  government  had  been  a  failure. 

I  most  heartily  congratulate  you.  With  renewed  thanks  for  your  courtesy, 
I  am,  as  ever,  very  truly,  your  old  friend, 

JAMES  0.  PUTIN  AM. 


Hon.  E.  G.  Spaulding. 


76 


HON.  A.  M.  CLAPP, 

Public  Printer  Washington. 

Office  of  the  Congressional  Printer,  ) 
Washington,  Oct.  18,  1869.  j 

My  Dear  Sir: — I  am  in  receipt  of  a  copy  of  your  “History  of  the  Legal 
Tender  paper  money  issued  during  the  Great  Rebellion,”  for  which  please 
accept  my  sincere  acknowledgments. 

The  great  financial  achievement  which  this  work  so  clearly  and  ably  pre¬ 
sents  to  the  public  mind,  is  the  most  wonderful  known  to  the  history  of 
nations,  and  I  but  do  you  simple  justice  when  I  say,  that,  to  your  financial 
wisdom  and  skill  the  country  is  in  a  large  degree  indebted  for  its  accomplish¬ 
ment.  It  detracts  nothing  from  the  honor  due  to  the  brave  officers  and  sol¬ 
diers  who  rallied  in  defence  of  the  Union  and  Constitution  when  in  peril,  and 
through  whose  courage  and  patriotism  our  national  salvation  was  perfected, 
to  say  that  like  credit  is  due  to  the  Statesmen  who  grappled  with  the  grea 
financial  problem  on  the  floor  of  Congress,  and  solved  it  in  law,  so  success¬ 
fully  that  the  Ways  and  Means  for  prosecuting  the  war,  subduing  the  rebel¬ 
lion,  restoring  peace,  and  extending  the  blessings  of  freedom  to  all  the  people 
of  this  nation,  were  obtained  without  recourse  to  other  agencies  than  the  na¬ 
tional  faith. 

Your  able  exposition  of  this  question  in  the  work  before  me — a  question 
upon  which  hung  the  national  life — entitles  you  to  the  gratitude  of  the  Amer¬ 
ican  people. 

I  am,  sir,  with  much  respect, 

Your  ob’t  servant, 

Hon.  E.  G.  Spaulding.  A.  M.  CLAPP. 

J.  D.  F.  LANIER, 

Banker. 

New  York,  May  6,  1873. 

E.  G.  Spaulding ,  Esq. 

Dear  Sir: — Yours  of  the  24th  April  is  received,  as  also  the  book  for  Mr. 
Harmon,  for  which  please  accept  my  thanks.  The  Book  shall  have  my  care¬ 
ful  attention. 

The  fact  is  I  do  not  see  how  we  could  have  got  through  with  the  late  war, 
but  for  the  Legal  Tender  Law. 

We  had  no  money,  no  credit  at  home  or  abroad.  The  Tender  Law  was 
absolutely  necessary  to  our  continued  existence.  No  one  has  suffered  by  it, 
but  all  have  gained.  The  Treasury  note  law  would  have  been  a  dead  letter 
but  for  the  legal  tender  act. 

Yours,  truly, 


J.  F.  D.  LANIER. 


77 


HON.  H.  L.  DAWES, 

Senator  from  Massachusetts. 

Pittsfield,  Mass.,  Nov.  6,  1869. 

Eon.  E.  G.  Spaulding, 

My  Dear  Sir  : — I  am  very  much  gratified  that  you  should  remember  me  ‘ 
with  a  copy  of  your  book,  “  The  Financial  History  of  the  War,”  It  does, 
indeed,  supply  a  very  important  omission  in  all  other  histories  of  the  war, 
and  will  become  at  once  a  book  of  reference.  It  is  also  a  monument  to  your 
own  statesmanship  in  the  darkest  hour  of  our  trial,  of  which  you  may  well 
be  proud,  and  to  which  you  have  a  right  to  call  the  attention  of  your  coun¬ 
trymen.  I  am,  truly  yours, 

H.  L.  DAWES. 

GOOD  MANAGEMENT  OF  FRENCH  FINANCES. 

The  following  facts  relating  to  the  currency  of  France  are  compiled  from 
documents  accessible  to  all  the  world  : 

1.  The  aggregate  circulation  of  notes  ot  the  Bank  of  France,  including 
“  notes  payable  to  order,”  was  on 

September  11,  1873 .  2,890,244,276  francs. 

September  9,  1875 . 2,361,819,283  francs. 

Decrease .  528,424,993  francs. 

2.  Counting  five  francs  as  equal  to  one  dollar,  this  is  a  contraction  of 
$105,684,999  in  twenty-four  months. 

3.  The  notes  of  the  Bank  of  France  are  the  only  paper  money  which 
circulates  in  France.  They  are  a  legal  tender,  are  paid  and  received  as  the 
equivalent  of  specie,  and  for  a  year  or  more  have  been  as  good  as  gold. 

4.  The  maximum  note  circulation  of  the  Bank  of  France  was  reached  on 
October  31,  1873,  when  it  was  3,071,000,000  francs,  or  $614,200,000.  The 
total  on  September  9,  1875,  as  above  given,  is  equal  $472,400,000,  being  a 
contraction  of  $141,800,000  in  less  than  two  years. 

5.  This  contraction  is  not  accidental,  like  the  trifling  reduction  which  has 
taken  place  during  the  current  year  in  our  legal  tender  and  bank  note  issues. 
In  the  language  of  the  inflationists,  it  is  “forced.” 

6.  During  the  war  and  the  payment  of  the  indemnity,  the  French  Govern¬ 
ment  borrowed  of  the  bank  an  immense  sum  in  notes,  for  which  it  paid  only 
one  per  cent,  per  annum  interest,  that  rate  being  barely  a  sufficient  compen¬ 
sation  to  the  bank  for  manufacturing  and  handling  the  notes. 

7.  For  the  past  two  years  the  French  Government  has  been  steadily  paying 
its  debt  to  the  bank,  preferring  to  fund  its  one  per  cent,  loan  into  five  per 
cent  rentes  rather  than  encounter  the  risks  of  an  inflated  paper  circulation. 1 

8.  The  total  amount  of  this  one  per  cent,  war  debt  due  from  the  govern¬ 
ment  to  the  bank  was,  on 

September  11,  1873. . 1,374,052,500  francs. 

September  9,1875 .  649,620,000  francs. 


Reduction, 
Equal  to. . 


724,432,500  francs. 
$144,886,500 


78 


9.  By  a  recent  treaty  with  the  bank,  the  government  engages  to  pay  off  the 
entire  amount  of  this  war  debt  by  the  end  of  the  year  1879. 

10.  The  bank  is  pledged  to  resume  the  full  payment  of  all  its  liabilities  in 
coin  on  Jan.  1 ,  1878,  by  which  time  the  government  engages  to  reduce  its 
war  debt  to  $60,000,000. 

11.  In  the  interval  the  policy  of  the  bank  is  not  “  to  make  the  volume  of  the 
currency  equal  to  the  wants  of  trade,”  but  on  the  contrary,  it  has  steadily  con¬ 
tracted  its  advances  to  the  mercantile  community  by  maintaining  a  higher  rate 
of  discount  than  that  ruling  in  the  open  market.  As  a  consequence  of  this 
policy  the  discounts  of  the  bank  have  diminished  as  follows.  They  were  on 

September  11,  1873 .  . 948,569,253  francs. 

September  9,1875  . 505,834,586  francs. 


Decrease . 442,734,667  franc3. 

Equal  to . . $88,546,933 

12.  At  the  present  time  the  rate  of  discount  at  the  Bank  of  France  is  four 
per  cent.,  while  that  at  the  Bank  of  England  is  only  two,  and  the  current 
rates  in  Paris  outside  of  the  bank  are  from  2%  to  3%. 

13.  In  consequence  of  this  double  operation,  i.  e .,  the  repayments  of  the 
government  and  of  the  private  debtors,  the  circulation  has  diminished,  as  we 
have  shown  above,  and  the  specie  in  possession  of  the  bank  has  increased  as 
follows :  It  was  on 

September  11,  1873 .  708,869,992  francs. 

September  9,  1875. . . . 1,618,943,228  francs. 


Increase .  910,073,236  francs. 

Equal  to . . . . $  182,014,647 

The  above  summary  embraces,  we  believe,  all  the  important  facts  in  rela¬ 
tion  to  the  changes  which  have  been  made  in  the  paper  circulation  of  France. 
Bold  and  energetic  as  the  action  of  the  bank  has  been,  no  injurious  effects 
on  trade  are  visible.  General  business  for  two  years  past  appears,  in  fact,  to 
have  been  much  better  in  France  than  it  has  been  in  either  England,  Ger¬ 
many,  or  the  United  States.  No  candid  man  can  extract  from  the  conduct 
of  the  French  Government  and  bank  a  particle  ot  countenance  for  any  of  the 
quack  money  schemes  which  have  been  broached  among  us.  They  have  fixed 
a  day  for  resumption,  as  we  have  done,  but  not  without  making  provision 
for  decreasing  their  paper  and  increasing  their  specie.  They  have  not  aimed 
at  a  cheap  currency,  with  the  maximum  of  paper  and  the  minimum  of  coin. 
They  have  not  confounded  gold  and  government  bonds  together,  and  deluded 
themselves  with  the  idea  that  there  is  no  essential  difference  between  the 
two.  The  end  to  which  the  Bank  of  France  is  aiming  is  to  make  its  notes 
at  all  times  and  under  all  circumstances  convertible  into  specie,  and  to  accom¬ 
plish  that  object  they  know  that  they  cannot  safely  issue  all  the  notes  that  the 
business  community  will  absorb  in  times  of  confidence,  nor  do  they  trust  to 
any  other  resources  in  time  of  difficulty  than  an  ample  stock  of  the  precious 
metals  in  their  vaults.  This,  as  we  understand  the  matter,  is  the  lesson 
taught  by  English,  German,  Dutch  and  French  banking — always  to  have  on 
hand  a  full  supply  of  the  exportable  precious  metals  in  order  to  maintain  the 
credit  of  the  non-exportable  promises  to  p  ly  those  metals. 


79 


HON.  DAVID  WILDER, 

State  Treasurer  of  Massachusetts. 

State  House,  ) 
Boston,  Sept.  16,  1864.  ( 

Hon.  E,  0.  Spaulding ,  President  F.  &  M.  Nat.  Bank ,  Buffalo,  N.  T. 

Dear  Sir.: — Your  note  of  the  11th  inst.  was  duly  received,  and  the  interest¬ 
ing  volume  prepared  by  you  has  since  come  to  hand  and  been  looked  over,  so 
far  as  I  have  been  able  to  command  the  necessary  time.  I  hardly  need  say  that 
I  am  greatly  obliged  for  both,  though  I  think  I  am  in  duty  bound  to  assure 
you  that,  to  those  of  us  who  care  to  watch  the  financial  machinery  of  the 
country,  nothing  could  be  more  opportune  or  interesting  than  your  account 
of  the  steps  by  which  we  are  able  to  make  the  industry  of  our  people  avail¬ 
able,  and  carry  on  the  war  so  much  better  than  could  be  done  by  our  foes, 
who  lacked  the  sinews  which  you  and  your  associates  supplied.  Your  book 
should  have  a  wide  circulation,  and,  after  being  read,  many  persons  will 
realize,  as  now  they  do  not,  how  much  you  had  to  contend  with,  and  how 
fatal  to  our  national  life  would  less  energy  on  your  part  have  proved. 

I  have  been  more  or  less  intimate  with  the  finances  of  Massachusetts 
since  1840,  as  clerk  in  the  Treasury  and  State  Auditor,  to  which  office  I 
was  appointed  when  it  was  cheated  in  1849,  and  I  can  understand  the  work 
you  did  for  us.  I  should  have  been  glad  if  our  idolatrous  worship  of  gold 
as  a  currency  (not  as  money)  had  been  less,  and  that  it  could  have  been  seen 
that  all  we  had  to  do  was  to  create  a  debt  or  lay  a  tax,  and  that  the  most 
direct  and,  under  the  circumstances,  perhaps  the  most  equitable  course,  was 
to  make  the  debt. 

Free  banking,  with  prompt,  par,  central  convertibility  of  notes  and  checks, 
is  what  the  country  needs  of  all  things  ;  having  first,  of  course,  an  immediate 
return  to  the  specie  standard,  or  change  from  the  debased  or  seventy-five  cent 
dollar  to  one  worth  one  hundred,  providing  that  all  contracts  now  existing 
and  payable  in  the  degraded  currency  shall  be  paid  in  that  when  due, 
or  in  an  equivalent  of  the  other,  so  that  there  shall  be  no  real  change  in 
the  relation  between  parties,  as  there  was  when  we  abandoned  specie  and 
substituted  paper,  with  the  idea  that  legislation  could  affix  or  determine  its 
value. 

If  interest  had  been  provided  for  on  the  legal  tenders,  and  the  notes  taken 
and  paid  as  currency  for  all  purposes ,  and  convertible  always  into  long  bonds 
with  gold  interest,  there  would  have  been  no  real  harm  done.  At  any  rate, 
legislation  could  not  have  swindled  the  then  creditors  by  depriving  them  in 
many  cases  of  one-half  the  real  value  of  their  claims.  Legal  tenders  without 
interest  were  bad,  while  with  interest  they  would  have  been  doubly  good. 

Truly  and  respectfully  yours, 

DAVID  WILDER. 


80 


GEORGE  S.  COE,  ESQ. 

American  Exchange  Nat’l  Bank,  ) 
New  York,  Sept.  28,  1875.  j 

E.  G.  Spaulding ,  Esq. , 

Dear  Sir: — Your  favor  of  the  25th  inst.  is  at  hand,  with  pamphlet  enclosed, 
which  I  have  only  time  at  the  moment  hastily  to  read.  I  will  give  it  a  more 
careful  perusal,  and  send  you,  as  desired,  such  comment  upon  the  subject  as 
my  familiarity  with  the  early  financial  events  of  the  war  may  suggest.  I  fully 
agree  with  you  that  the  two  great  errors  of  Secretary  Chase  were,  first,  his 
refusal  to  use  the  instruments  and  expedients  that  the  experience  of  commercial 
nations  has  made  necessary  for  banks  in  distributing  the  money  which  our 
associated  banks  loaned  the  government.  Second,  that  he  assented  to  the 
suggestion  of  the  brokers,  whom  he  afterwards  employed  to  sell  the  govern¬ 
ment  bonds,  by  divorcing  the  currency  debt  from  the  funded  debt,  so  that  the 
former  could  no  longer  be  converted  into  the  latter,  and  was  therefore  left  to 
indefinite  deterioration.  This  was  a  clever  device  to  facilitate  the  sale  of 
bonds,  but  a  fatal  one  to  the  currency.  I  do  not  believe  it  possible  to  restore 
specie  payments  otherwise  than  by  re-enacting  this  funding  power  and  can¬ 
celling  every  note  thus  exchanged.  But  the  public  feeling  of  obligation  has 
become  so  weakened  that  a  rate  of  interest  will  be  insisted  upon  too  low  to 
accomplish  the  object.  Yours  truly, 

GEO.  S.  COE. 


H.  BOWLBY  WILLSON,  ESQ. 

90  Drexel  Building,  ) 
New  York,  Oct.  1,  1875.  ) 

Hon.  E.  G.  Spaulding ,  Buffalo,  N.  Y. 

Dear  Sir: — I  am  in  receipt  of  advanced  sheets  containing  the  introduction 
to  the  second  edition  of  your  valuable  work  on  “  The  Financial  History  of 
the  War,”  for  which  attention  please  accept  my  best  thanks.  The  second 
edition,  and  especially  the  introduction  to  it,  appears  before  the  public  very 
appropriately  at  this  time,  when  the  currency  question  is  rapidly  assuming 
national  importance. 

I  have  read  the  introduction  twice  over,  and  have  to  say  “  it  is  all  gold  and 
no  dross.”  It  makes  entirely  clear  who  was  responsible  for  the  financial 
policy  of  the  government  which  led  to  an  over  issue  of  irredeemable  paper 
money,  which  produced  the  fathomless  abyss  in  which  the  country  is  now 
floundering.  In  1869,  I  pointed  out  in  the  columns  of  the  New  York  Herald 
this  erroneous  policy  ;  but  I  was  then,  and  so  remained,  until  I  received  your 
new  introduction,  quite  in  the  dark  as  to  the  originators  of  that  policy  and 
the  exact  modus  operandi  by  which  it  was  worked  out  to  its  fatal  results  on 
our  whole  financial  and  commercial  system.  This  introduction,  I  repeat, 
comes  most  acceptably  at  this  time,  and  adds  materially  to  the  interest  of 
your  “Financial  History.” 

On  the  principles  of  paper  money  or  currency  proper,  we  entirely  agree,  as 
indeed  all  students  of  political  economy  must — those  principles  being  estab- 


81 


lished  by  scientific  and  analytical  reasoning.  If  there  is  any  room  for  differ¬ 
ence,  it  may  possibly  be  found  in  devising  the  safest  and  best  method  for  the 
issue  and  regulation  of  such  money.  It  now  more  than  ever  seems  to  me  to 
be  desirable  that  we  should  adopt  the  English  and  French  systems  of  with¬ 
drawing  the  power  from  the  banking  corporations  to  issue  currency  notes, 
and  lodge  the  same  in  the  hands  of  a  department  of  the  government,  so  con¬ 
stituted  that,  like  the  supreme  bench,  the  whole  monetary  system  of  the 
country  may  be,  so  far  as  possible,  removed  from  the  vortex  of  party  politics. 
Professor  Price,  in  his  Oxford  lectures,  characterizes  the  issue  department  of 
the  Bank  of  England  as  “  a  government  department  carried  on  on  the  premi¬ 
ses  of  the  bank.”  I  would  not  place  any  bank  in  that  responsible  position. 

The  question,  in  my  judgment,  should  now  be  permanently  settled  by  a 
constitional  amendment,  leaving  no  option  to  Congress  but  to  pass  laws  in 
conformity  with  its  provisions  ;  and  one  should  be,  that  no  more  paper 
money  shall  at  any  time  be  issued  than  can  be  maintained  at  par  with  gold. 
There  is  no  other  method,  as  yet  known,  whereby  the  amount  of  such  money 
necessary  to  meet  the  requirements  of  business  can  be  determined.  It  is  the 
simple  natural  law  of  supply  and  demand,  the  indications  of  which  are  always 
clear  and  easily  understood  by  those  issuing  circulating  notes.  Under  such  a 
system  the  legal  tender  character  of  government  notes  may  be  dispensed 
with,  and  our  national  paper,  like  our  gold,  will  pass  everywhere  on  a  par 
with  each  other.  Excuse  this  digression,  and  believe  me  to  remain, 

Y ery  truly  yours, 

•  H.  BOWLBY  WILLSON. 

HON.  ISAAC  SHERMAN, 

Political  Economist. 

18  West  20th  Street,  ) 
New  York,  Oct.  10,  1875.  y 

Hon.  E.  G.  Spaulding  : 

I  have  received  and  read  with  great  pleasure  the  preface  to  your  new 
edition  of  “  The  History  of  the  Legal  Tender  Act.”  Your  work  will  not 
only  do  good  at  present,  but  it  will  remain  as  an  historical  authority  on  the 
subject,  and  cannot  fail  to  be  an  important  contribution  to  the  reliable  records 
of  our  recent  war.  It  will  also  put  in  a  compact  and  accessible  form  the 
most  forcible  arguments  for  a  return  to  specie  payments.  I  doubt  if  you 
know  how  much  good  and  effective  results  your  work  is  doing,  and  I  hope 
that  you  will  continue  to  make  new  editions — at  least  until  we  shall  have  a 
resumption  of  specie  payments. 

I  wish  to  call  your  attention  to  a  fact  that  it  is  possible  may  not  have  been 
brought  to  your  notice.  In  the  case  of  flosvelt  vs.  Meyer,  1  Wallace,  512, 
involving  the  constitutionality  of  the  legal  tender,  a  motion  to  dismiss  was 
granted ;  and  in  the  case  of  Trefilcock  vs.  Wilson.  12  Wallace,  687,  involv¬ 
ing  the  same  question.  The  case  of  Bosevelt  vs.  Meyer  was  fairly  and 
squarely  submitted.  Now,  have  you  ever  reflected  what  would  have  been 
the  decision  in  the  case  of  Bosevelt  vs.  Meyer,  in  the  winter  of  1864,  if  the 


82 


case  had  not  been  dismissed  ?  If  you  will  examine  the  list  of  judges,  you 
will  see  that  seven  members  of  the  court  would  have  voted  against  the  con¬ 
stitutionality  of  the  law.  I  suppose  the  case  was  undoubtedly  dismissed  for 
political  reasons,  and  not  on  law  grounds.  Mr.  Chase  was  still  Secretary 
of  the  Treasury,  and  the  war  progressing,  and  an  adverse  decision  would 
have  entailed  great  financial  disturbance  while  we  were  confronting  the 
enemy.  Mr.  Roelker,  the  counsel  of  Mr.  Meyer,  has  told  me  that  Mr.  Chase 
was  very  anxious  that  the  case  should  not  be  decided  on  its  merits,  and  that 
it  should  be  dismissed.  It  is  probable,  considering  the  later  overruling  of 
the  dismissal,  that  the  dismissal  was  a  judicial  dodge.  The  court  quite  proba¬ 
bly,  therefore,  has  been  once  manipulated  and  once  packed  on  the  legal 
tender  question.  It  seems  to  me  that  in  some  of  your  future  editions  of 
your  work  it  would  be  well  to  insert  in  full  the  conflicting  decisions  of  Rose- 
velt  vs.  Meyer  and  of  Trefilcock  vs.  Wilson.  These  decisions  are  very  in¬ 
structive,  and  will  show  to  those  wdio  hereafter  come  upon  the  political 
stage  not  only  what  Congress  will  do  in  great  national  emergencies,  but  also 
what  the  highest  court  will  do  in  such  emergencies.  I  do  not  mean  by  this 
language  to  condemn  either  Congress  or  the  judiciary,  because  I  have  always 
said  that  if  it  was  absolutely  necessary  to  save  the  country  to  violate  the 
constitution,  I  would  not  hesilate  to  violate  the  constitution.  The  constitu¬ 
tion  was  made  for  the  country,  and  not  the  country  for  the  constitution  ; 
and  the  absolute  safety  of  the  country  must  therefore  be  paramount  to  the 
constitution.  Still,  I  think  it  best  to  give  posterity  all  the  facts,  and  I  think 
you  can  with  propriety  say  that  your  only  hope  is  that  future  generations,  in 
a  like  great  emergency,  will  only  act  as  wisely,  discreetly,  magnanimously 
and  patriotically  as  the  people  in  your  generation  have  acted  against  the 
great  slave  rebellion.  Yours  very  respectfully, 

ISAAC  SHERMAN. 


HON.  JOHN  J.  KNOX. 

Treasury  Department,  ) 

Office  of  Comptroller  of  .the  Currency,  v 
Washington,  Oct.  29, 1869.  ) 

My  Dear  Sir: — I  have  received  your  note  of  the  25th  inst.,  and  also  the 
volume  you  were  so  kind  as  to  send  me.  “Truth  is  stronger  than  fiction,” 
and  the  “  History  of  the  Legal  Tender  Paper  Money  used  during  the  Great 
Rebellion,”  and  the  results  are  more  interesting  and  wonderful  than  any 
work  of  fiction. 

You  have  done  yourself  great  honor  by  your  services  as  a  financial  general 
during  the  rebellion,  and  in  the  preparation  of  this  little  volume  you  have 
furnished  a  most  convenient  record  of  the  sayings  and  acts  of  those  servants 
of  the  people  whose  duty  it  was  to  supply  the  means  with  which  to  protect 
and  finally  save  the  country.  Please  accept  my  thanks  for  the  volume,  and 
believe  me,  Very  truly  yours, 

JNO.  JAY  KNOX. 

Hon.  E.  G.  Spaulding,  Buffalo,  N.  Y. 


83 


HON.  W.  P.  FESSENDEN. 


Portland,  Aug.  7,  1869. 

Hon.  E.  G.  Spaulding, 

My  Dear  Sir: — On  my  return  from  a  short  visit  to  the  eastern  portion  of 
our  state,  I  found  your  letter  of  the  21st  of  July,  and  the  book  referred  to 
therein.  I  have  not  yet  had  time  to  examine  the  history,  but,  from  your 
close  connection  with  the  financial  events  of  the  war,  I  have  no  doubt,  of  its 
correctness  and  value.  As  a  participator  in  those  events,  I  am  able  to  testify 
to  the  want  of  comprehension  of  all  previous  writers  upon  the  subject.  You 
were  entirely  able  to  fill  the  void,  and  I  have  no  doubt  you  have  done  so. 
Please  accept  my  thanks,  and  bejieve  me, 

Truly  yours, 

W.  P.  FESSENDEN. 


HON.  JOHN  COBURN, 

Member  of  Congress  from  Indiana. 

House  of  Representatives,  ) 
Washington,  D.  C.,  April  12,  1870.  f 

Hon.  E.  G.  Spaulding , 

Dear  Sir: — Your  letter,  with  “  Financial  History  of  the  War,”  came  duly 
to  hand.  Please  accept  my  thanks  for  the  work.  It  is  really  an  invaluable 
portion  of  the  great  history  of  the  great  struggle  for  national  life.  Your 
opportunities  for  knowledge  of  the  subject  being  of  the  finest  character, 
posterity,  as  well  as  the  present  age,  must  owe  you  a  debt  of  gratitude  for 
this  timely  service  in  fixing  in  permanent  form  a  clear  and  concise  statement 
of  all  the  facts  The  conduct  of  our  finances  and  the  struggle  in  the  field  are 
equally  creditable  and  memorable,  and  must  be  forever  linked  inseparably 
together  afe  exhibitions  of  the  energy  and  genius  of  our  race. 

Yours  truly, 

JOHN  COBURN. 


A.  R.  ENO. 

New  York,  March  29,  1884. 

Hon.  E.  G.  Spaulding , 

Dear  Sir: — If  the  truths  in  your  letter  could  have  been  placed  before  the 
public  at  an  earlier  day,  in  the  clear  and  forcible  manner  in  which  you  have 
stated  them,  I  think  they  would  have  so  influenced  public  sentiment  that  we 
should  have  been  spared  a  portion  of  the  mischief  resulting  from  present 
inflation.  Mr.  Chase  has  done  well.  I  hope  his  great  success  will  not  render 
him  indifferent  to  wise  counsel.  I  thank  you  for  sending  me  the  letter,  and 
am,  Very  truly,  your  obedient  servant, 

A.  R.  ENO. 

F.  A.  CONKLING. 

New  York,  Oct.  17,  1875. 

Hon.  E.  G.  Spaulding , 

Dear  Sir: — Accept  my  hearty  thanks  for  the  advanced  sheets  of  the 
“  Introduction  ”  to  a  further  publication  of  your  “  Financial  History  of  the 


84 


War  of  tlie  Rebellion.”  I  am  glad  that  you  contemplate  the  issuing  of  a  new 
edition  of  a  work,  for  the  prepartion  of  which  you  are  fitted  above  all  other 
men.  Your  position  as  Chairman  of  the  Sub-committee  of  Ways  and  Means 
of  the  House  of  Representatives,  at  the  time  the  legal  tender  act  was  passed, 
placed  you  in  possession  of  facts  which,  from  the  nature  of  the  case,  others 
could  not  know. 

The  Thirty-seventh  Congress  was  one  of  the  most  statesmanlike  and  patri¬ 
otic  bodies  which  ever  assembled  in  this  or  any  other  country.  It  promptly 
apprehended  the  magnitude  of  the  questions  before  it,  and  to  the  utmost  of 
its  ability  met  them  in  the  most  efficient  manner.  It  was,  perhaps,  the 
greatest  calamity  of  the  war  that  the  financial  policy  established  by  that 
Congress  was  not  cordially  seconded  and  continued  by  successors  and  by  the 
head  of  the  Treasury  Deparment. 

Mr.  Chase  was  pressed  for  that  position  because  of  the  regard  of  the  people 
for  his  high  personal  reputation.  He  had  been  an  original  free-soiler,  and 
had  won  the  favor  of  the  men  of  advanced  views  upon  that  subject.  He  had 
been  originally  chosen  to  the  United  States  Senate  by  Democratic  votes  on 
the  supposition  that  his  views  on  financial  and  analagous  questions  were 
acceptable  to  the  Democratic  party  as  it  was  then  constituted.  He  was  a 
conspicuous  candidate  for  the  presidential  nomination  in  1860,  and,  in  the 
estimation  of  many,  presented  the  ideal  of  an  American  statesman. 

Upon  the  election  of  Mr.  Lincoln,  it  was  the  demand  of  Mr.  Chase’s  friends 
that  he  should  occupy  a  leading  position  in  the  cabinet.  The  President-elect 
was  himself  disposed  to  comply  with  this  desire.  At  the  request  of  Mr. 
Horace  Greeley,  I  accompanied  him  on  a  visit  to  Mr.  Lincoln,  to  urge  that 
Mr.  Chase  should  receive  the  portfolio  of  the  Treasury.  We  had  been  led  to 
believe  that  another  choice  had  been  made  for  this  all-important  position. 
We  represented  to  Mr.  Lincoln  that  a  struggle  was  imminent  which  would 
be  decided  in  favor  of  the  party  whose  resources  held  out  the  longest,  and 
accordingly  that  a  minister  of  finance  was  required  who  would  command,  in 
the  highest  degree,  the  public  confidence.  Mr.  Chase,  as  we  believed,  pos¬ 
sessed  that  confidence  as  no  other  man  did  whose  name  was  under  consid¬ 
eration. 

The  day  following  this  interview  I  received  a  note  from  Greeley,  informing 
me  that  Mr.  Chase  had  declined  the  offer  of  the  Treasury  Department.  I  lost 
no  time  in  calling  upon  him  at  his  hotel.  Mr.  Chase  pleaded  that  his  educa¬ 
tion  and  habits  had  not  fitted  him  for  the  duties  of  the  place  ;  and,  he  added 
with  his  accustomed  courtesy,  that  if  he  had  had  an  education  like  my  own, 
he  would  feel  less  distrust  of  his  qualifications  for  the  office.  His  appro¬ 
priate  sphere  he  believed  to  be  the  Senate,  to  which  he  had  just  been  chosen 
for  the  full  term  of  six  years.  In  response,  I  assured  him  that  his  friends 
regarded  it  as  his  duty  to  accept  the  Secretaryship  of  the  Treasury;  and 
furthermore,  that  he  could  at  all  times  count  upon  the  support  of  every 
patriotic  man  whose  services  he  might  desire  to  command.  Mr.  Chase  finally 
said,  substantially,  that  he  would  be  guided  by  the  convictions  of  his  friends. 

A  few  days  subsequently  on  my  return  to  New  York,  I  took  the  liberty  to 


85 


suggest  to  him  the  advisability  of  inviting  proposals  for  what  remained  of 
the  twenty-five  million  loan  which  had  been  authorized  in  the  closing  days  of 
Mr.  Buchanan’s  administration.  At  his  invitation  I  visited  Washington,  but 
I  found  him  disinclined  to  offer  the  loan  except  upon  terms  which  I  felt  con¬ 
fident  could  not  then  be  obtained.  It  was  apparent  that  he  had  thus  early 
become  a  convert  to  the  so-called  paper  policy.  Finding  it  of  no  use  to  argue 
the  point,  I  made  no  further  attempt  to  influence  his  views.  It  was  an  acute 
disappointment  that  the  man  whom  we  had  regarded  as  the  strongest  sup¬ 
porter  of  a  stable  financial  system,  had  so  utterly  abandoned  that  idea.  If  he 
had  depended  on  loans  properly  secured  by  taxation,  and  had  placed  his 
reliance  upon  the  patriotism  of  the  country,  it  is  my  belief  that  the  credit  of 
the  nation  would  have  been  maintained  upon  a  permanent  foundation,  and  the 
depreciation  of  our  currency  would  have  been,  in  a  great  measure,  obviated. 
The  machinery  of  our  banks  was  at  his  disposal,  and  never  had  a  more  gener¬ 
ous  disposition  been  shown  by  the  monied  interest  of  any  country  to  support 
the  measures  of  a  financial  minister. 

The  two  loan  acts  passed  at  the  extra  session  of  the  Thirty-seventh  Congress 
provided  for  the  modification  of  the  sub-treasury  law,  for  the  express  purpose 
of  enabling  the  Secretary  to  avail  himself  of  these  facilities.  But  he  refused 
to  accept  them,  an  dpersisted  in  demanding  that  the  banks  should  pay  in  coin 
the  amount  of  the  loans  for  which  they  had  subscribed.  The  effect  was  most 
disastrous.  He  thus  destroyed,  almost  at  a  blow,  the  basis  of  bank  credits, 
and  forced  a  suspension  of  specie'payments.  The  gold  which  had  constituted 
the  basis  of  banking  transactions  was  absorbed  by  the  Treasury,  to  be  paid 
out  to  contractors,  and  immediately  to  be  hoarded  where  it  could  no  longer 
be  useful  in  business  or  for  the  public  exigencies.  Mr.  Chase  might  have 
avoided  this,  but  he  saw  fit  to  precipitate  the  disaster.  To  do  this  in  a  period 
of  national  calamity,  I  shall  always  regard  as  an  act  of  most  extraordinary 
infatuation. 

Immediately  after  the  failure  of  the  banks,  the  bill  was  introduced  by  your¬ 
self  authorizing  the  issue  of  United  States  notes  to  circulate  as  currency,  and 
providing  for  the  funding  of  them  in  six  per  cent,  bonds.  Your  plea  was 
that  of  necessity.  I  did  not  share  your  views.  Accordingly,  I  opposed  in 
debate  the  proposition  to  issue  a  legal  tender  paper  currency  which  the  fram¬ 
ers  of  the  constitution  had  wisely  intended  to  inhibit.  At  the  same  time,  I  am 
free  to  admit,  that  the  accompanying  provision  to  fund  these  paper  promises 
promptly  in  the  bonds  of  the  United  States  was  a  measure  of  redemption 
which  could  not,  under  the  circumstances,  be  too  highly  commended.  At 
this  moment  it  presents  the  only  means  possible  for  an  early  and  safe  return 
to  specie  payments.  Had  it  been  consistently  adhered  to,  it  would  have 
brought  the  country  to  that  point  before  the  present,  administration  came  into 
power. 

But  unhappily,  a  Congress  succeeded  to  the  thirty-seventh  which  was  not 
controlled  by  the  high  moral  considerations,  and  which  did  not  possess  the 
capacity  of  its  predecessor.  Loose  views  of  financial  integrity  were  enter¬ 
tained.  The  Secretary  of  the  Treasury  found  the  majority  were  pliable  to 
his  purposes.  At  his  demand  legislation  was  had  abrogating  the  provision 


86. 


for  the  conversion  of  the  legal  tender  notes  into  bonds  and  also  empowering 
him  to  issue  other  evidences  of  debt  at  his  discretion.  A  power  so  tremen¬ 
dous  has  seldom,  if  ever  before,  been  lodged  in  the  hands  of  a  minister.  I 
am  constrained  to  say  that  it  was  exercised  almost  wantonly.  The  credit  of 
the  nation  was  depreciated  to  the  verge  of  bankruptcy.  A  five  per  cent,  loan 
was  placed  on  the  market;  compound  interest  notes  and  other  ephemeral 
devices  were  resorted  to  in  order  to  shove  up  the  stupendous  financial  fabric 
which  seemed  to  be  tottering  to  its  fall.  I  counted  the  different  varieties  of 
paper  which  were  emitted  until,  if  my  memory  serves  me  right,  the  number 
reached  thirty-three,  when  I  gave  up  in  despair. 

The  instinct  of  the  people  was  wiser  than  the  subtlety  of  the  men  who 
assumed  to  guide  it.  Mr.  Lincoln  was  placed  a  second  time  in  the  field  for 
President,  while  Mr.  Chase  was  compelled  to  yield  to  the  storm  which  he 
had  created  and  retire  from  the  Treasury.  To  the  errors  of  his  three  years 
of  office  the  country  is  indebted  for  the  needless  augumentation  of  the  public 
debt  by  the  sum  of  at  least  one  thousand  million  dollars.  But  perhaps  a  still 
greater  evil  was  the  repudiation,  by  an  obsequious  majority  in  Congress,  of 
the  national  faith  which  had  been  pledged  to  the  holders  of  the  legal  tender 
notes.  By  section  I  of  the  act  approved  February  25,  1872,  it  is  provided 
that  “  any  holder  of  said  United  States  notes,  depositing  any  sum  not  less 
than  fifty  dollars,  or  some  multiple  of  fifty  dollars,  with  the  Treasurer  of  the 
United  States,  or  either  of  the  Assistant  Treasurers,  shall  receive  in  exchange 
therefor  duplicate  certificates  of  deposit,  one  of  which  may  be  transmitted 
to  the  Secretary  of  the  Treasury,  who  shall  thereupon  issue  to  the  holder  an 
equal  amount  of  the  bonds  of  the  United  States,  ”  etc.  This  provision,  which 
was  endorsed  upon  every  note  issued,  was  repealed  in  a  manner  which  I 
must  characterize  as  clandestine.  Henceforth  the  notes  were  irredeemable, 
and  in  that  form  they  sunk  from  one  depth  of  degradation  to  another,  until 
they  were  worth  but  one-third  of  their  face  value.  The  moral  sense  of  the 
community  was  also  debased  until  it  became  as  low  as  that  of  the  govern¬ 
ment. 

Under  the  ensuing  administration  an  ability  and  integrity  of  purpose  was 
displayed  by  the  Secretary  of  the  Treasury,  the  Hon.  Hugh  McCulluch, 
which,  had  he  been  properly  seconded  by  Congress,  might  still  have  retrieved 
the  national  faith.  But  a  career  of  jobbery  had  now  been  entered  upon. 
Partisanship  superseded  the  dictates  of  national  honor.  This  chapter  of  our 
history  will  be  perused  by  Americans  in  the  future  only  with  emotions  of 
shame. 

The  appointment  of  Mr.  Boutwell  to -the  Treasury  Department  was  a  con¬ 
cession  to  the  spirit  of  the  times.  Under  his  administration  of  the  public 
finances,  the  currency,  which  had  been  legalized  only  as  a  war  measure  out¬ 
side  and  beyond  the  constitution,  was  still  further  expanded,  although  peace 
had  been  restored  and  its  original  purpose  had  been  accomplished. 

It  is  an  encouraging  omen  that  the  public  mind  has  at  length  become  aroused 
to  the  importance  of  restoring  the  constitutional  currency.  Wherever  elec¬ 
tions  have  been  held,  the  people,  in  disregard  of  partisan  considerations,  have 


87 


voted  against  any  further  inflation  of  the  currency.  I  devoutly  trust  that  the 
good  work  will  go  on  until  the  great  wrong  which  has  been  inflicted  upon 
the  industry  of  the  nation  shall  be  righted.  You  will,  I  trust,  pardon  me 
for  saying  in  conclusion  that  the  first  requisite  for  the  accomplishment  of 
this  desirable  end  is  a  radical  change  in  the  administration  of  the  govern¬ 
ment.  Faithfully  yours, 

F.  A.  CONKLING. 

Hon.  S.  S.  Cox  having  made  a  good  speech  in  the  House  in  opposition  to 
inflation  and  repudiation,  Mr.  Spaulding  addressed  him  a  letter  on  the  sub¬ 
ject.  The  following  is  an  extract  from  Mr.  Cox’s  letter  in  reply: 

“  You  see  I  have  refreshed  myself  at  your  fountain.  I  am  happy  that  the 
opportunity  occurred  to  hit  repudiation  between  the  eyes.  We  are  all  on  our 
side  so  entirely  powerless  we  cannot  but  challenge  the  Republicans  to  do 
something  in  the  coin  line.  I  will  never  cease  to  remind  them  of  your  pledges 
and  the  plighted  faith  of  Congress.  As  if  a  debt  in  the  people’s  pockets  was 
not  as  honorable  an  obligation,  and  more  so,  than  any  other  !  *  *  * 

Yours  truly, 

December  24,  1869.  S.  S.  COX. 


A.  A.  LOW,  ESQ. 

New  York,  Sept.  24, 1869. 

Hon.  E.  G.  Spaulding,  Buffalo, 

Dear  Sir: — Your  valued  favor  of  the  17th  instant  was  duly  received, 
together  with  the  volume  on  the  “  Financial  History  of  the  War,”  for  which 
I  am  much  obliged.  It  is  an  interesting  and  valuable  work.  I  can  say  this 
wfithout  having  progressed  verjT  far  in  the  reading  of  it.  I  shall  take  it  up 
and  finish  it  at  my  leisure. 

I  was,  from  the  first,  in  favor  of  the  “  legal  tender  ”  act,  of  wThich  you  were 
so  largely  the  author,  believing  it  to  be  a  necessity.  I  have  not  seen  any 
reason  to  change  my  mind  with  the  progress  of  events.  But  the  war  being 
over.  I  confess  to  a  good  deal  of  disappointment  to  find  how  great  and  how 
general  is  the  unwillingness  of  the  people  at  large  to  return  to  a  sound  cur¬ 
rency.  The  patriotism  that  carried  the  North  through  the  war  seems  to  be 
exhausted,  and  demoralization  to  have  taken  its  place.  Some  few  there  are  in 
favor  of  returning  to  specie  payments,  professedly,  but  if  any  plan  is  suggested 
looking  to  contraction  as  a  means  to  this  end,  it  will  be  found  to  have  no 
friends. 

If  we  cannot  have  existing  evils  remedied  in  any  other  way,  I  hope  the 
Supreme  Court  of  the  United  States  will  find  that  while  the  law  making 
United  States  notes  a  “  legal  tender  ”  was  “  necessary  and  proper  ”  during  the 
war,  it  is  neither  constitutional  or  right,  now  that  the  war  and  the  necessity 
have  passed  away.  Certainly  this  view  should  apply  to  any  further  issue. 
Unless  we  get  relief  in  this  way,  I  despair  of  any  that  does  not  come  by  the 
severe  discipline  that  follows  wrong  doing.  *  *  *  I  remain,  dear  sir, 

Most  respectfully  yours, 


A.  A.  LOW. 


88 


GEN.  J.  D.  COX. 

Department  of  the  Interior,  ) 
Washington,  Nov.  10,  1869.  f 

My  Dear  Sir: — I  thank  you  very  heartily  for  the  copy  of  the  “  Financial 
History,”  which  I  recognize  as  a  valuable  contribution  toward  the  elucidation 
and  final  solution  of  our  great  financial  problem.  I  have  so  often  heard  your 
views  referred  to  by  my  brother  and  his  partner,  Mr.  Robinson,  that  I  am 
eager  to  have  the  opportunity  of  personal  conference  with  you  on  what  I 
regard  as  the  crucial  question  this  administration  has  to  meet,  viz. ,  the  return 
to  specie  payments,  and  a  currency  with  a  real  and  fixed  value. 

To  turn  our  faces  at  once,  and  like  a  flint,  in  the  direction  of  resumption,  I 
hold  to  be  our  cardinal  duty.  The  rapidity  of  the  movement  is  of  less  conse¬ 
quence,  the  danger  being  rather  that  we  should  go  too  fast  when  once  started. 

I  am  rejoiced  that  the  country  is  to  continue  to  have  the  benefit  of  your 
experienced  counsels,  and  trust  it  may  not  be  long  till  I  shall  have  the  oppor¬ 
tunity  of  discussing  these  matters  with  you  in  person. 

Very  respectfully  and  truly,  your  obedient  servant, 

Hon.  E.  G.  Spaulding.  J.  D.  COX. 


HON.  JUSTIN  S.  MORRILL, 

A  member  of  the  Senate  Finance  Committee. 

Stafford,  Vt.,  Oct.  9,  1875. 

Hon.  E.  G.  Spaulding ,  Buffalo,  N.  7., 

My  Dear  Sir: — I  have  received  and  read  with  interest  your  “Introduc¬ 
tion  ”  to  the  second  edition  of  your  “  Financial  History  of  the  War.”  It  is 
able,  impartial  and  timely,  and,  like  the  original  work,  reflects  great  credit 
upon  the  author.  I  hope  it  is  destined  to  exert  all  the  influence  in  the  settle¬ 
ment  of  the  grave  questions  pending  that  its  merits  so  well  deserve.  If  you 
differed  from  me  at  the  inception  of  some  of  these  financial  measures,  we  do 
not  differ  now,  and  I  am  glad  you  find  leisure  and  feel  it  to  be  your  duty  to 
still  render  services  to  your  country. 

Very  sincerely  yours,  JUSTIN  S.  MORRILL. 

HON.  JOHN  J.  CTSCO, 

Asst.  Treasurer  in  New  York  while  Mr.  Chase  was  Sec’y  of  the  Treasury. 

59  Wall  Street,  ) 
New  York,  Oct.  25,  1875.  [ 

My  Dear  Sir: — With  your  letter  I  duly  received  the  advance  sheets  of 
your  “  Introduction  ”  to  a  further  edition  of  the  “  History- of  the  Legal  Ten¬ 
der  Act,”  for  which  please  accept  thanks. 

I  have  carefully  read  your  statement  of  facts,  and  they  fully  accord  with 
my  memory  regarding  them.  Your  volume  will  be  an  exceedingly  valuable 
acquisition  to  the  financial  histories  of  the  world.  Since  the  close  of  the 
rebellion  there  has  been  no  well  defined  financial  policy  leading  us  in  the 
direction  of  specie  payments,  and  to  this  failure  on  the  part  of  the  govern¬ 
ment  we  may  attribute  the  downfall  m  the  panic  of  1873  of  the  “  paper  struc¬ 
ture  ”  we  had  reared,  and  the  subsequent  paralysis  of  the  mercantile  and 
industrial  interests  of  the  nation.  There  can  be  no  permanent  prosperity  to 
our  country  until  we  are  restored  to  a  sound  basis  for  our  transactions.  With 
kind  regards,  Yours  very  truly,  JOHN  J.  CISCO. 

Hon.  E.  G.  Spaulding,  Buffalo,  N.  Y. 


89 


GEORGE  S.  COE,  ESQ., 

On  our  early  Financial  War  Measures  and  the  First  and  Second  Mistakes  of 
Secretary  Chase — War  Currency — Specie  Payments,  Sub-Treasury,  etc. 

American  Exchange  National  Bank,  ) 
New  York,  Oct.  8,  1875.  } 

Son.  E.  G.  Spaulding,  Buffalo ,  N.  Y., 

Dear  Sir: — Your  favor  of  the  25th  ult.  came  duly  to  hand,  in  which  you 
ask  me  to  give  my  personal  recollection  in  full  of  the  circumstances  con¬ 
nected  with  the  early  part  of  the  financial  history  of  the  war. 

After  the  accession  of  Mr.  Lincoln  to  the  Presidency,  the  securities  of  the 
government  became  difficult  of  sale,  and  they  declined  to  such  an  extent  that 
for  the  week  ending  June  24,  1861,  the  following  quotations  were  published: 


U.  S.  Bonds,  1881  (coupon),  6  per  cent . . .  ...  83%  83% 

“  Treasury  notes,  12  per  cent,  int .  101%  102 

“  “  “  11  “  . 101  101% 

“  “  “  10%  “  . 100% 


Zealous  exertions  had  been  made  by  carefully-organized  committees  of  the 
New  York  Chamber  of  Commerce,  the  month  before,  to  obtain  subscriptions 
to  government  loans  by  sending  circulars  throughout  the  Northern  States,  in 
which  citizens,  public  officers,  banks,  and  other  institutions,  were  solicited 
to  act  as  voluntary  agents.  But  the  aggregate  secured  was  inconsiderable, 
and  utterly  failed  of  the  amount  required  for  pressing  necessity.  The  great 
conflict  was  rising  daily  into  more  appalling  magnitude.  Moneyed  capital,  with 
instinctive  timidity,  buttoned  tightly  its  pockets,  and  shrank  from  the  danger. 

Fortunately,  the  commercial  conditibns  of  the  Northern  States  were  alto¬ 
gether  favorable.  The  panic  of  1857  had  been  followed  by  three  or  four 
years  of  great  productiveness  and  economy,  which  had  so  turned  international 
exchanges  in  favor  of  this  country  that  larger  balances  in  coin  than  ever 
before  had,  during  1860  and  1861,  been  imported  from  Europe.  The  banks  in 
New  York  alone  holding  the  unpredecented  amount  of  fifty  millions,  equal 
in  August,  1861,  to  about  fifty  per  cent,  of  their  liabilities,  while  the  appre¬ 
hension  of  war  had  produced  a  general  curtailment  of  credit  throughout  the 
Northern  States. 

After  the  disastrous  battle  of  Bull  Bun,  and  when  Washington  was  closely 
beleaguered,  and  the  avenue  thence  to  New  York  through  Baltimore  was 
intercepted  by  the  enemy,  Mr.  Chase,  then  Secretary  of  the  Treasury,  came  to 
this  city  via  Annapolis,  and  immediately  invited  all  persons  in  this  community 
who  were  supposed  to  possess  or  to  control  capital  to  meet  him  on  the  evening 
of  August  9th,  at  the  house  of  John  J.  Cisco,  Esq.,  then  Assistant  Treasurer  of 
the  United  States  in  New  York.  This  invitation  drew  together  a  large  unmber 
of  gentlemen  of  various  occupations  and  circumstances.  During  the  discus¬ 
sion  which  ensued,  I  suggested  the  practicability  of  uniting  the  banks  of  the 
North  by  some  organization  that  would  combine  them  into  aD  efficient  and 
inseparable  body,  for  the  purpose  of  advancing  the  capital  of  the  country 
upon  government  bonds  in  large  amounts,  and  through,  their  clearing-house 
facilities  and  other  well-known  expedients,  to  distribute  them  in  smaller  sums 
among  the  people  in  a  manner  that  would  secure  active  co-operation  among 
the  members  in  this  special  work,  while  in  all  other  respects  each  bank  could 


90 


pursue  its  independent  business.  This  suggestion  met  the  hearty  approbation 
of  the  assembled  company,  and  arrested  the  earnest  attention  of  the  Secre¬ 
tary.  At  his  request  it  was  presented  to  the  consideration  of  the  banks  at  a 
meeting  called  for  that  purpose  at  the  American  Exchange  Bank  on  the 
following  day,  and  was  so  far  entertained  as  to  secure  the  appointment  of 
a  committee  of  ten  bank  officers,  to  give  it  form  and  coherence.  The  com¬ 
mittee  convened  at  the  Bank  of  Commerce,  whose  officers  zealously  united  in 
the  effort,  and  a  plan  was  reported  unanimously.  It  may  be  found,  with  the 
names  of  the  committee,  in  the  Bankers'  Magazine  of  September,  1861.  Their 
report  was  cordially  accepted  and  adopted  by  the  banks  in  New  York,  those 
in  Boston  and  Philadelphia  being  represented  at  the  meeting  and  as  zealously 
and  cordially  united  in  the  organization.  It  was  greatly  desired  ter  include 
also  the  banks  of  the  West,  but  it  was  found  impracticable  to  secure  the  co¬ 
operation  of  the  state  banks  of  Ohio  and  Indiana,  and  the  state  banks  of 
Missouri,  the  only  other  organization  under  a  compacted  system,  were  sur¬ 
rounded  by  combatants. 

It  was  at  once  unanimously  agreed  that  the  associated  banks  of  the  three 
cities  would  take  fifty  millions  of  7  3-10  notes  at  par,  with  the  privilege  of 
an  additional  fifty  millions  in  sixty  days,  and  a  further  amount  of  fifty  mil¬ 
lions  in  sixty  days  more,  making  one  hundred  and  fifty  millions  in  all,  and 
offer  them  for  sale  to  the  people  of  the  country  at  the  same  price,  without 
change.  In  this  great  undertaking  the  banks  of  New  York  assumed  more 
than  their  relative  proportion.  To  ensure  full  co-operation  and  success,  the 
expedient  of  issuing  clearing-house  certificates,  and  of  appropriating  and 
averaging  all  the  coin  in  the  various  banks  as  a  common  fund,  which  had 
been  invented  but  the  year  before,  was  applied  to  this  special  object  with 
good  effect. 

So  vast  a  responsibility,  involving  figures  of  such  magnitude,  had  never 
before  been  attempted  in  this  country,  and  the  assumption  of  it  with  such 
promptitude  was  without  precedent  in  history. 

The  capitals  of  the  banks  thus  associated  made  an  aggregate  of  one  hun¬ 
dred  and  twenty  millions,  an  amount  greater  than  the  Bank  of  England  and 
the  Bank  of  France  combined,  each  of  which  institutions  had  been  found 
sufficient  for  the  gigantic  struggles  of  those  great  nations,  from  time  to  time, 
in  conflict  with  all  Europe.  And  this  combination,  made  up  of  distinct  and 
independent  corporations,  while  it  possessed  all  needed  capacity  for  govern¬ 
ment  work,  was  free  from  the  objections  made  to  one  great  financial  institu¬ 
tion.  The  following  figures  also  show  that  its  financial  condition  was  one  of 


great  strength: 

, - LIABILITIES - v  ASSETS  IN 

Deposits.  Circulation.  coin. 

Banks  in  New  York . $  92,046,308  $  8,521,426  $49,733,990 

“  Boston  : .  18,235,061  6,366,466  6,665,929 

“  Philadelphia .  15,335,838  2,076,857  6,765,120 


$125,617,207  $  16,964,749 
125,617,207 


Total . $142,581,956  against  $63,165,039 


coin  on  hand,  equal  to  45  per  cent,  of  all  liabilities.  Surley,  such  conditions 


91 


as  these,  with  judicious  administration,  were  adequate  to  the  work  which  the 
country  required.  A  great  merit  of  this  bank  combination  at  that  critical 
moment,  when  the  life  of  the  nation  hung  in  the  balance,  consisted  in  the 
fact  that  it  fully  committed  the  hitherto  hesitating  moneyed  capital  of  the 
North  and  East  to  the  support  of  the  government.  The  bank  officers  and 
directors  who  thus  counselled  and  consented  were  deeply  sensible  of  the  mo¬ 
mentous  responsibility  which  they  assumed,  but  all  doubt  and  hesitation  were 
instantly  removed,  and  perfect  unanimity  was  secured  by  the  question, 
“  What  if  we  do  not  unite!'1'1  And,  acting  as  guardians  of  a  great  trust 
exposed  to  imminent  danger,  they  fearlessly  elected  the  alternative  best  cal¬ 
culated  to  protect  it. 

The  problem  to  be  practically  resolved  by  the  Banks  was  this.  How  can 
the  available  capital  be  best  drawn  from  the  people,  and  devoted  to  the  sup¬ 
port  of  Government,  with  the  least  disturbance  to  the  country?  and  by  what 
means  can  arms,  clothing  and  subsistence  for  the  army  be  best  secured  in  ex¬ 
change  for  Government  credit  ?  These  were  simply  questions  of  domestic 
exchange,  and  most  naturally  suggested  the  use  of  the  ordinary  methods  of 
Bank  checks,  deposits  and  transfers,  that  the  experience  of  all  civilized  na¬ 
tions  had  found  most  efficient  for  the  purpose,  and  that  this  should  be  accom¬ 
plished  by  the  Associated  Banks,  in  a  manner  best  calculated  to  prolong  their 
useful  agency,  and  to  preserve  the  specie  standard,  it  was  indispensible  that 
their  coin  reserves  remain  with  the  least  possible  change.  Accordingly  it 
was  at  once  proposed  to  the  Secretary  that  he  should  suspend  the  operations 
of  the  Sub-Treasury  Act  in  respect  to  these  transactions,  and  following  the 
cour»e  of  commercial  business,  that  he  should  draw  checks  upon  some  one 
Bank  in  each  city  representing  the  Association,  in  small  sums  as  required,  in 
disbursing  the  money  thus  advanced.  By  this  means  his  checks  would  serve 
the  purpose  of  a  circulating  medium,  continually  redeemed,  and  the  ex¬ 
changes  of  capital  and  industry  would  be  best  promoted.  This  was  the 
more  important  in  a  period  of  public  agitation  when  the  disbursement  of 
these  large  sums  exclusively  in  coin,  rendered  the  reserves  of  the  Banks  all 
the  more  liable  to  be  wasted  by  hoarding.  To  the  astonishment  of  the  com¬ 
mittee,  Mr.  Chase  refused.  Notwithstanding  the  act  of  Congress  of  August 
5th,  which  it  seemed  to  us  was  passed  for  the  very  object  then  presented,  but 
which  he  declared  upon  his  authority  as  finance  minister,  and  from  his  per¬ 
sonal  knowledge  of  its  purpose,  had  no  such  meaning  or  intent.  This  issue 
was  discussed  from  time  to  time  with  much  zeal,  but  always  with  the  same 
result.  It  was  seen  by  the  most  experienced  Bank  officers  to  be  vital  to  the 
success  of  their  undertaking.  To  draw  from  “the  Banks  in  coin  the  large 
sums  involved  in  these  loans,  and  to  transfer  them  to  the  Treasury,  thence  to 
be  widely  scatter  over  the  country  at  a  moment  when  war  had  excited  fear 
and  distrust,  was  to  be  pulling  out  continually  the  foundations  upon  which 
the  whole  structure  rested.  And  inasmuch  as  this  money  was  loaned  to  the 
Government,  and  was  in  no  sense  a  trust  reposed  in  the  Banks,  there  appeared 
to  them  no  reason  why  it  should  not  be  drawn  by  checks  in  favor  of  Govern¬ 
ment  contractors  and  creditors,  who  would  require  to  exchange  them  for 
other  values  in  commerce  and  trade,  through  the  processes  of  the  clearing- 


92 


house.  And  this  consideration  was  greatly  strengthened  by  the  fact  that 
these  advances  were  made  and  the  money  publicly  disbursed,  a  long  time 
before  the  Treasury  Notes  were  ready  lor  delivery  to  the  Banks  which  had 
paid  for  them.  In  the  light  which  has  since  been  shed  upon  the  act  of  Con¬ 
gress  referred  to,  it  is  evident  that  undue  weight  was  given  to  the  views  of 
the  Secretary,  and  that  the  Banks  would  have  conferred  an  incalculable  ben¬ 
efit  upon  the  country,  had  they  adhered  inflexibly  to  their  own  opinions.  But 
the  pressure  of  startling  events  required  prompt  decision,  and  the  well  known 
intelligence  and  patriotism  of  the  Secretary,  gave  to  his  judgment  overwhelm¬ 
ing  power.  It  soon  became  manifest  that  in  consenting  to  have  their  hands 
tied,  and  their  most  efficient  powers  restricted,  while  engaged  in  these  great 
operations,  and  in  allowing  their  coin  reserves  to  be  wasted,  by  pouring  them 
out  upon  the  community  in  a  manner  so  unnecessary  and  exceptional,  the 
Banks  deprived  themselves  and  the  Government  of  the  ability  of  long  con¬ 
tinuing,  as  they  otherwise  could  have  done,  to  negotiate  the  national  loans 
upon  a  specie  standard. 

This  first  great  error,  if  it  did  not  create  a  necessity  for  the  legal  tender 
notes,  it  certainly  precipitated  the  adoption  of  that  most  unhappy  expedient, 
and  thereby  committed  the  nation  at  an  earlier  day,  to  the  most  expensive 
of  all  methods  of  financiering. 

One  other  subject  of  discussion  between  the  Secretary  and  the  Associated 
Banks  at  the  same  time  arose,  which  led  in  the  same  direction.  Congress  by 
its  act  of  17th  July,  had  authorized  loans  to  the  amount  of  two  hundred  and 
fifty  millions.  This  could  be  issued  either  in  Bonds  running  twenty  years  at 
not  over  seven  per  cent,  interest — 7-30  notes  running  three  years,  o*  fifty 
millions  of  the  amount  could,  at  the  discretion  of  the  Secretary,  be  made  in 
currency  notes  payable  on  demand  without  interest.  As  the  undertaking  of 
the  Associated  Banks  covered  one  hundred  and  fifty  millions  of  this  sum, 
and  it  was  desired  that  they  continue  the  work  thus  auspiciously  begun,  a 
question  of  the  expediency  of  putting  out  the  circulating  notes  was  immedi¬ 
ately  raised  by  one  of  its  members.  A  very  small  amount  had  been  emitted. 
The  Treasury  was  empty  of  coin  to  redeem  them,  and  could  only  be  replen¬ 
ished  by  the  proceeds  of  the  Bank  loans.  It  was  evident  to  the  Bank  officers 
that  they  could  not  sustain  coin  payments,  if  the  transfers  from  their  vaults 
to  that  of  the  Treasury,  were  subject  to  be  intercepted  and  absorbed  by  these 
notes  of  Government.  Nor  could  the  Banks  receive  them  upon  deposit  from 
the  public  as  money,  while  they  were  responding  to  the  Government  and  to 
their  own  dealers  in  coin.  It  was  an  inflation  of  the  currency  in  the  lorm 
most  embarrassing  to  the  enterprise  they  had  commenced.  Accordingly  the 
Secretary  was  urgently  solicited  to  refrain  from  exercising  the  discretionary 
powers  given  him  of  creating  the  Treasury  currency,  until  all  other  means 
were  exhausted.  In  response  to  a  resolution  to  that  effect,  the  Secretary  as¬ 
sured  the  Bank  officers  of  his  acquiescence  in  their  suggestion,  but  at  the 
same  time  insisted  that  it  was  improper  for  a  public  officer  to  openly  pledge 
himself  not  to  exercise  a  power  conferred  by  the  law.  W  ith  this  understand¬ 
ing  the  Banks  began  their  work,  paying  into  the  Treasury  in  coin  one  hun¬ 
dred  and  fifty  millions  in  sums  at  the  rate  of  about  five  millions  at  intervals 


93 


of  six  days.  Even  with  all  these  unfavorable  circumstances  surrounding 
them,  it  was  an  encouraging  fact  observed  by  those  who  were  anxiously 
watching  the  practical  operation  of  this  great  and  novel  experiment,  that 
while  the  circulating  notes  in  the  country  were  restricted,  the  disbursements 
of  the  Government  for  the  war,  were  so  rapid,  and  the  consequent  internal 
trade  movement  was  so  intense,  that  the  coin  paid  out,  upon  each  instalment 
of  the  loan,  came  back  to  the  Banks  through  the  community,  in  about  one 
week.  The  natural  effect  of  this  general  commercial  activity  upon  the  cir¬ 
culating  medium,  being  simply  to  quicken  its  flow. 

After  taking  the  third  amount  of  fifty  millions  by  the  Associated  Banks, 
those  in  New  York  who  had  at  that  time  paid  in  of  their  proportion  over 
eighty  millions  in  all,  found  themselves  in  this  position. 

Their  aggregate  coin,  which  on  the  17th  August,  before  the 


first  payment  into  the  Treasury,  was .  $49,783,990 

Was  in  December  7th .  42,318,610 

A  reduction  of  only . .  $7,415,380 

and  the  other  two  cities  in  like  proportion. 


In  the  meantime  the  7-30  notes  taken  by  the  banks  had  been  purchased  by 
the  people  to  the  extent  of  some  fifty  millions,  notwithstanding  a  prolonged 
and  vexatious  delay  in  issuing  them  by  the  Treasury  Department.  The  pop¬ 
ular  feeling  was  all  that  could  have  been  desired  for  continuing  that,  method 
of  distribution.  It  may  be  confidently  affirmed  that  had  the  banks  beeji 
permitted  to  exercise  their  own  methods  of  exchanging  the  bonds  for  the 
varied  products  of  industry  required  by  the  Government,  they  could  have 
continued  their  advances  in  sums  of  fifty  millions  for  an  indefinite  period, 
and  until  the  available  resources  of  the  people  had  been  all  gathered  in.  It  is 
to  be  borne  in  mind  that  these  resources  were  all  existing  at  home,  and  that 
the  increased  industry  which  the  war  excited,  was  daily  creating  new  means 
for  investment.  It  may  be  presumptuous  to  affirm  that  the  legal  tender 
notes  could  have  been  dispensed  with  altogether.  But  it  is  safe  to  say  that 
the  causes  which  seemed  to  justify  that  act  would  have  been  long  deferred  to 
the  saving  of  hundreds  of  millions  to  the  country. 

But  at  this  time  the  demand  notes  were  paid  out  freely  by  the  Treasury, 
and  began  to  appear  as  a  cause  of  embarrassment  among  the  banks  who 
were  pressed  to  receive  them  upon  deposit,  and  while  they  could  not  decline 
them  without  diminishing  public  confidence  in  the  Government  credit,  they 
could  not  give  them  currency  without  impairing  their  own  specie  strength. 
In  fact  the  notes  became  at  once  a  substitute  for  coin  withdrawn  from  circu¬ 
lation,  and  their  emission  expressed  a  purpose  of  resorting  to  Government 
paper  issues  to  carry  on  the  war.  So  soon  as  these  notes  thus  appeared  the 
reflux  of  coin  to  the  banks  at  once  sensibly  diminished.  During  three  weeks 
from  the  7th  December,  the  reserves  of  the  banks  in  New  York  fell  to 
$29,357,712;  a  loss  of  thirteen  millions  within  that  short  period,  and  on  the 
28th  December,  after  conference  with  the  Secretary,  in  which  he  still  adhered 
to  the  views  before  expressed,  it  was  decided  as  expedient  for  the  banks  to 
suspend  specie  payments. 


94 


At  that  moment  the  associated  banks  yet  held  over  forty  millions  in  coin, 
and  it  was  still  possible  for  them  to  continue  their  advances  to  the  Govern¬ 
ment  but  for  the  two  obstacles  thus  interposed.  Before  entering  into  this 
last  conference  with  the  associated  banks,  some  of  ihe  members  expressed  to 
the  Secretary  the  importance  of  continuing  his  relation  to  an  organization 
which  combined  so  much  of  experience,  capital  and  financial  resource,  and 
which  was  yet  capable  of  rendering  the  Government  invaluable  service.  And 
that  if  an  irredeemable  paper  currency  was  the  inevitable  resort,  it  would  be 
more  expedient  and  economical  for  the  Government  not  to  become  involved  in 
its  dangers,  but  to  impose  the  duty  and  responsibility  of  issuing  the  notes  upon 
the  banks,  who  would  naturally  be  compelled  to  keep  tne  day  of  redemp¬ 
tion  continually  in  view  Thus,  as  a  suspension  of  coin  payment  was  about 
to  be  declared,  it  was  practicable  to  preserve  from  distribution  and  set  aside 
the  forty  millions  of  coin  then  owned  by  the  banks,  together  with  one  hun¬ 
dred  and  fifty  or  sixty  millions  of  Governmnnt  bonds,  which  could  be  taken 
by  them  as  a  special  security  for  two  hundred  millions  of  notes,  which  could 
then  be  immediately  issued  by  the  associated  banks  from  their  own  plates, 
and  be  verified  and  made  national  by  the  stamp  and  signature  of  a  govern¬ 
ment  officer.  And  that  such  an  issue,  so  supported  by  coin  and  bonds,  at 
once  simple  and  expeditious,  would  serve  the  temporary  purpose  required, 
with  little,  if  any,  deterioration  below  coin  value,  and  that  it  would  be  then 
practicable  for  the  banks  to  continue  without  further  agitation  their  ad¬ 
vances.  But  the  Secretary  declined  to  entertain  this  suggestion,  preferring 
the  system  of  national  banks,  which  he  had  already  conceived. 

Looking  back  over  events  that  have  since  transpired,  it  must  be  admitted 
that  this  suggestion  possessed  true  merit.  It  would  have  preserved  a  coin 
basis  for  the  currency,  prevented  the  destructive  expansion,  relieved  the 
Government  from  its  almost  inextricable  entanglement  with  the  circulating 
notes,  and  compelled  an  early  restoration  of  coin  payments.  And  with  a 
proper  use  of  the  expedients  and  machinery  of  banks,  by  utilizing  their 
power  of  effecting  exchanges,  which  was  subsequently  applied  by  the  Secre¬ 
tary  in  the  national  banking  system  without  reserve,  this  amount  would  have 
been  found  sufficient.  When  we  review  the  excessive  cost  of  the  war.  the 
vast  increase  of  the  national  debt,  and  the  public  and  private  evils  which  a 
profuse  currency  have  entailed  upon  the  country,  it  must  appear  evident  that 
in  failing  early  to  use  and  to  exhaust  all  those  means  and  appliances  of 
commerce  and  banking  that  the  experience  of  other  civilized  nations  have 
proved  most  effective,  a  great  and  irreparable  mistake  was  made. 

One  more  good  service  the  banks  in  New  York  were  yet  enabled  to  perform, 
which,  although  not  great  in  amount,  was  most  important  in  its  effect  upon 
the  credit  of  the  government. 

On  the  first  day  of  January,  1863,  $8,000,000  of  the  national  debt,  issued  in 
1842,  became  due.  It  was  the  first  loan  that  matured  after  the  passage  of  the 
legal  tender  act,  and  upon  its  prompt  payment  in  coin,  in  which  the  debt  was 
incurred,  depended  the  reputation  and  credit  of  the  United  States  at  home  and 
abroad,  and  its  ability  to  make  future  loans  upon  favorable  terms.  It  was  a 
momentous  question  whether  the  government  would  apply  the  new  law  to  its 


95 


own  obligations,  and  thus  establish  a  precedent  for  the  future.  There  was 
not  sufficient  money  in  the  Treasury  to  pay  the  debt,  and  up  to  the  latest  hour 
the  question  was  anxiously  discussed  in  the  departments  at  Washington, 
and  almost  decided,  to  plead  inability  and  to  fall  back  upon  the  legal  enact¬ 
ment.  At  this  juncture  Mr.  Cisco,  Assistant  Treasurer  in  New  York,  to 
whose  patriotic  service  and  wisdom  the  nation  is  greatly  indebted,  zealously 
interposed  his  influence.  Upon  his  application  to  the  banks  there,  they 
promptly  furnished  the  requisite  amount  in  gold,  receiving  his  personal 
assurance  that  it  should  be  repaid  out  of  the  revenue  when  received  at  his 
office,  and  thus  the  country  was  again  saved  from  an  irretrievable  financial 
disaster. 

The  legal  tender  act  was  regarded  by  very  many  men  of  influence,  from 
the  beginning,  as  a  foregone  conclusion,  and  as  a  measure  of  inevitable 
necessity  in  war.  Great  doubt  was  continually  expressed  whether  this  peo¬ 
ple  would  submit  to  the  necessary  taxation  for  war  purposes,  and  whether 
the  country  would  bear  the  strain  Of  so  gigantic  a  struggle  if  conducted  upon 
principles  of  sound  commercial  economy.  However  we  may  now  honestly 
differ  upon  that  subject,  as  we  did  then,  it  is  certain  that  had  the  real  temper 
of  the  nation  been  earlier  felt  by  the  government,  it  would  have  greatly 
modified  and  retarded  the  financial  legislation  of  Congress,  and  the  practical 
administration  of  the  Treasury.  The  people  proved  tht  mselves  to  be  thor¬ 
oughly  in  .earnest.  They  needed  no  patronage  to  awaken  the  most  heroic 
devotion,  and  to  draw  out  the  noblest  sacrifices  as  well  in  private  life  as  in 
the  army. 

It  is  more  immediately  practical  to  enquire  what  was  the  nature  and  effect 
of  that  important  act  ? 

It  was,  in  simple  fact,  an  arbitrary  and  absolute  decree  of  the  government, 
that  with  an  empty  treasury,  and  in  need  of  all  things,  its  notes  payable 
whenever  able  and  without  interest,  should  be  accepted  by  the  people  as 
money.  The  primary  object  was  to  secure  material  of  war  without  present 
payment,  and  in  order  to  effect  this  exchange  it  was  necessary,  secondly,  that 
the  edict  should  empower  those  who  first  received  the  notes  to  enforce  them 
as  money  in  like  manner  upon  others,  and  so  to  distribute  the  burthen 
throughout  the  community. 

This  forcible  entry  of  the  government  into  the  private  affairs  of  the  people, 
so  utterly  at  variance  with  the  fundamental  principles  of  our  system,  so  great 
an  abridgment  of  personal  liberty,  and  operating  as  a  tax  so  unequal  in  its 
effects,  was  a  rigorous  measure  of  war,  and  as  such  was  vindicated  only  as  a 
temporary  act  of  dive  necessity.  In  enforcing  this  unequal  burthen,  Congress 
did  not  leave  the  holders  of  the  notes  without  some  measure  of  relief,  but  it 
gave  to  all  the  option  of  converting  them  at  pleasure  into  a  six  per  cent, 
gold-interest-bearing  bond,  payable  in  twenty  years.  By  this  means,  the  notes 
became  equal  in  value  to  the  bonds  for  which  they  were  made  exchangable, 
and  while  during  the  war  the  payments  of  gold  interest  continually  operated 
to  produce  a  curtailment  of  the  volume  of  the  notes  in  circulation,  the  return 
of  peace  opened  a  market  abroad  for  the  bonds,  which  would  have  ensured 


96 


the  early  and  entire  absorption  of  the  war  currency,  and  thus  cleared  th<t 
way  for  specie  payments. 

But,  in  an  evil  hour  for  the  country,  other  counsel  obtained  possession  of 
the  good  judgment  of  the  Secretary,  and  yielding  to  it,  he  consented  and 
urged  Congress  to  withdraw  this  privilege  of  converting  the  notes,  so  that 
thenceforth  all  issues  were  made  without  it.  All  notes  emitted  consequently 
became  an  unmitigated  burthen  upon  commerce  of  indefinite  duration,  from 
which  there  was  no  escape.  A.  new  currency  was  created  utterly  at  variance 
with  all  economic  laws,  and  in  conflict  with  all  recognized  rules  of  com¬ 
merce  and  exchange.  It  did  not,  like  all  sound  currency,  naturally  spring 
out  of  industry,  production  and  trade,  but  it  was  an  enforced  result  of  ex¬ 
haustion  and  necessity.  It  did  not  come  and  go,  following  the  beneficent 
courses  of  commerce,  expanding  and  contracting  with  the  times  and  seasons 
that  required  it.  But  it  remained  an  unyielding,  inflexible  mass,  subject  only 
to  the  chances  and  vicissitudes  of  war.  As  the  war  progressed  and  the  country 
became  poorer,  this  cuifrency  increased,  giving  new  instruments  and  facilities 
to  expend  just  in  proportion  as  the  means  of  payment  were  consumed.  Witn 
a  compulsory  currency  thus  made,  the  measure  of  prices  and  daily  deterior¬ 
ating  yet  still  increasing,  is  it  strange  that  all  other  property  was  eagerly 
sought  for  in  preference  to  this,  and  that  prodigal  expenditure  became  thei 
law  of  the  land  ? 

In  depriving  the  currency  of  its  convertible  privilege,  it  has  been  made  per¬ 
petual.  Ten  years  of  peace  have  elapsed  and  it  yet  remains.  Commerce  did 
not  originate  and  cannot  absorb  it.  There  is  no  natural  relation  between  the 
two,  but  they  continue  in  their  original  antagonism. 

I  believe  that  the  only  practicable  relief  to  the  country  must  come  from 
restoring  this  privilege.  Not  of  conversion  into  six  per  cent,  bonds,  but 
in  those  hearing  such  rate  of  interest — say  five  per  cent. — as  will  induce 
holders  to  exchange  them.  This  simple  measure,  coupled  with  the  repeal  of 
the  legal  tender  act  for  all  future  operations,  will,  in  my  judgment,  open  the 
way  for  the  gradual  and  easy  disposition  of  this  unnatural  currency — will 
restore  commerce  to  the  operations  of  natural  laws,  give  a  new  and  healthy 
stimulus  to  industry  and  trade,  and  with  a  country  as  rich  and  productive  as 
ours,  we  shall  speedily  return  to  general  prosperity.  This  is  the  last  struggle 
of  the  war,  and  I  believe  that  the  whole  country  earnestly  desire  to  meet  and 
to  finish  it.  Very  truly  yours, 

GEO.  S.  COE. 


HON.  JOHN  E.  WILLIAMS. 

Historical  and  Prophetic  Letter  to  Secretary  Chase. 

Metropolitan  National  Bank,  > 
New  York,  Oct.  21, 1875.  ) 

Eon.  E.  O.  Spaulding, 

My  Dear  Sir:— Since  I  read  your  greenback  history  and  introduction  to 
the  second  edition,  I  have  looked  over  copies  of  some  of  my  letters  of  the 
war  period.  I  found  one  dated  Oct.  4,  1861,  to  Secretary  Chase  which  so 


coincides  with  your  views  that  I  have  copied  it  and  send  it  to  you  enclosed. 
Do  with  it  what  you  please,  *  *  * 


Yours  very  truly, 


J.  E.  WILLIAMS. 


Eon.  Salmon  P.  Chase ,  Secretary;  etc.,  Washington  City: 

My  Dear  Sir: — Many  thanks  for  the  kindly  words  to  me,  personally,  in 
your  letter  of  the  1st  instant.  I  only  wish  they  were  better  deserved. 

Will  you  permit  me  to  add  a  few  more  plain  words — as  you  like  frankness 
— on  this  all  engrossing  subject?  In  the  hope,  not- only  that  I  may  make 
myself  more  intelligible,  but  with  the  hope,  also,  ( I  confess,)  of  modifying 
your  views* 

A  complete  understanding  of  this  subject  is  of  quite  as  much  importance 
to  the  Government  as  to  the  banks.  Indeed,  as  you  substantially  suggested, 
our  interests  in  this  matter  are  identical.  Whatever  strengthens  the  banks’ 
vaults,  increases  public  confidence  in  them,  and  in  their  ability  to  carry  the 
Government  through.  While  an  increase  in  the  Sub-Treasury’s  coin  weakens 
us  and  the  Government  too.  For  the  public,  the  people  understand  that  you 
rely  on  us.  Herein  is  a  mutual  interest,  then,  which  I  propose  to  speak  of 
plainly,  directly  and  respectfully. 

You  give  as  a  reason  for  not  drawing  your  checks  on  the  “Loan  Banks,” 
that,  “however,  harmless  or  beneficial  it  might  be,  if  confined  to  the  New 
York  banks,  it  would  inevitably  result  in  a  general  payment  and  receipt  for 
public  dues  of  bank  notes,  which  in  turn  would  lead  to  expansion,  which  in 
turn  would  terminate  in  suspension  and  vast  injuries  to  the  sound  banks.” 

1st.  I  confess  this  dark  array  of  disastrous  consequences  has  a  black  face 
on  it.  But  as  neither  of  us  is  afraid  to  look  into  faces  of  that  color,  let  us  try 
and  see  what  lies  beneath. 

The  law  authorizes  you  to  select  specie  paying  banks.  Suppose  you  designate, 
as  such,  only  banks  in  New  York,  Philadelphia  and  Boston,  as  “  Loan  Banks” 
to  draw  upon.  You  are  thus  relieved  from  any  necessity  of  looking  at  what 
might  be  the  consequences  if  you  were  to  draw  on  other  or  less  responsible 
banks.  This  narrows  the  question  down  to  those  three  cities  in  which  the 
banks  have  made  common  cause  with  you,  and  they  guarantee  each  other  for 
the  fulfilment  of  their  contract  with  you.  The  banks  in  all  these  cities  are  as 
sound  as  the  banks  in  either  city. 

2d.  What  you  seem  to  regard  as  a  dangerous  element,  the  bank  officers  look 
upon  as  essential  to  their  safety.  What  you  think  would  guard  against  sus¬ 
pension  of  specie  payments,  they  think  most  likely  to  precipitate  that  demor¬ 
alizing  calamity.  What  you  claim  for  the  Sub-Treasury,  they  ask  for  the 
banks — the  disbursement  of  all  United  States  funds  !  While  you  regard  the 
payment  of  public  dues  in  bank  notes,  convertible  at  the  pleasure  of  the 
holder  into  coin,  as  an  evil  to  be  avoided,  they  hold  it  to  be  as  convenient  and 
safe  a  mode  of  discharging  public  obligations  as  it  is  private  debts.  While 
you  speculate  as  to  what  is  best  for  sound  banks,  they  think,  with  their  practi- 


98 


cal  experience,  they  know  what  is  best  for  their  institutions.  And  inasmuch 
as  the  law  was  made  to  give  the  banks  this  advantage,  they  feel  they  have  a 
right  to  demand  it. 

3d.  Their  general  reasons  for  these  conclusions  are  that  Congress  meant 
something,  (it  is  but  fair  to  suppose)  when  they  passed  the  act  of  August  5th, 
1861,  suspending  so  far  the  Sub-Treasury  Act  as  to  allow  you  to  do  what  we 
ask,  namely,  draw  on  the  loan  banks.  You  will  remember  you  agreed,  so  far 
as  it  was  in  your  power,  to  conform  your  operations  in  this  regard  to  our 
wishes.  That  was  the  result  of  our  understanding  with  you  as  taken  down 
after  you  left  us  on  Saturday,  from  the  lips  of  each  of  the  bank  officers  com¬ 
posing  the  committee,  who  heard  all  you  said  and  noticed  your  earnest 
manner.  For  myself,  I  was  instructed  not  to  agree  to  take  our  share  of  the 
second  fifty  millions  unless  the  Government  would  so  far  agree  to  help  us  as 
to  draw  on  the  banks  that  furnished  the  money.  This  feeling  arose,  not  so 
much  from  a  desire  to  derive  any  petty  gain  of  time  or  interest  by  this  mode, 
as  it  did  from  a  wish  to  adopt  a  method  which  would  enable  the  banks  to 
carry  through ,  without  ruin  to  themselves,  this  unprecedented  loan  to  the 
Government.  In  point  ot  magnitude  without  a  precedent,  I  believe,  in  any 
country. 

4th.  You  can  now,  perhaps,  better  than  before,  enter  into  our  feelings  and 
understand  our  surprise  that  you  should  not  take  our  judgment  in  this  mat¬ 
ter,  but  rather  argue  on  the  supposition  that  we  do  not  understand  the  legiti¬ 
mate  operations  of  our  own  business  so  well  as  you  do.  This  happens,  too, 
under  circumstances  very  peculiar.  But  for  the  banks  the  Government  could 
not  pay  at  all !  It  would  have  been  bankrupt  six  weeks  ago.  Surely,  my 
dear  sir,  this  is  no  time  for  splitting  hairs,  or  for  you  to  tell  bank  officers — 
(impliedly,  it  is  true,)  that  they  don’t  understand  what  dangers  they  propose 
to  encounter.  Nor  is  it  a  time  for  you  to  refuse  what  they  ask  merely  on  an 
abstract  theory  of  yours  as  to  what  might  happen.  If,  on  the  other  hand, 
you  should  persist  in  the  course  you  indicate,  is  there  not  danger  that  you 
will  create  the  very  evil  we  all  desire  to  avoid,  namely,  a  suspension  of  specie 
payments? 

5th.  As  to  the  two-years’  treasury  notes,  I  am  more  and  more  of  the  opinion 
that  you  have  no  legal  right  to  take  them  of  the  people  at  large,  whether  our 
treasury  note  committee  requests  you  to  take  them  or  not  to  take  them,  it  is 
all  the  same,  in  my  opinion,  as  to  your  duty.  The  associated  banks  paid 
you  a  consideration  for  taking  these  notes  out  of  their  vaults,  and  you  con¬ 
tracted  to  do  so.  They  pay  j’-ou  in  another  loan  ol  fifty  millions.  If  the 
public  or  a  foreign  country  had  loaned  you  fifty  millions  on  similar  terms, 
you  would  have  been  justified,  no  doubt,  by  Congress  in  making  a  law  unto 
yourself  predicated  on  public  necessity.  But  no  such  loan  has  been  made, 
either  by  the  public  or  by  Europe. 

Already  the  brokers  are  telling  us  that  they  shall  pass  in  the  two-years’ 
notes,  which  they  have  bought  at  a  discount,  take  out  the  7-30  notes  and  sell 
them  on  the  street  at  a  discount,  which  they  can,  and  make  a  profit — thus 
commanding  the  market.  This  is  the  first  disastrous  demonstration,  but,  I 
jear,  by  no  means  the  last. 


99 


i 


The  case  plainly  stated  looks  unsightly.  You  hire  money  at  7-30  to  pay 
obligations  bearing  only  6  per  cent,  interest  not  due  for  a  year  and  a  half, 
when  you  need  that  very  money  to  maintain  your  existence,  and  when,  as  I 
sincerely  believe,  you  are  under  no  moral  or  legal  obligation  to  pay  a  dollar, 
but  on  the  contrary,  are  bound  not  to  pay  without  the  sanction  of  Congress. 

One  word  and  I  have  done.  You  will  remember  that  you  said  to  us  in  the 
committee,  “  I  am  so  desirous  of  meeting  your  views  that  I  would  almost 
place  myself  in  the  hands  of  this  Treasury  Note  Committee,  to  do  as  they 
should  say,  confident  they  would  not  ask  of  me  anything  illegal  or  improper.” 
This,  sir,  induced  me  to  move  the  taking  of  the  second  fifty  millions. 

I  am,  most  respectfully  and  very  truly  yours, 

J.  E.  WILLIAMS. 


HON.  GEORGE  WILLIAM  CURTISS. 

West  New  Brighton,  ) 
Staten  Island,  Oct.  11,  1875.  j 

My  Dear  Sir: — I  thank  you  for  your  introductory  pamphlet,  which  comes 
at  a  most  opportune  moment,  and  will  be  of  great  assistance  in  enlightening 
the  public  mind  and  in  forming  a  sound  opinion. 

With  great  regard,  very  truly  yours, 

GEORGE  WILLIAM  CURTISS. 

Hon.  E.  G.  Spaulding. 


HON.  E.  H.  STOUGHTON. 

New  York,  Nov.  25,  1869. 

Dear  Sir: — Accept  my  thanks  for  the  copy  you  were  kind  enough  to  send 
me  of  your  instructive  and  interesting  “  History  of  the  Legal  Tender  Paper 
Money  Issued  During  the  Great  Rebellion.”  I  there  find,  within  a  narrow 
compass,  admirably  arranged,  all  that  need  be  studied  on  the  subject ;  and 
in  connnection  with  what  is  purely  historical,  may  also  be  found  thoughts  and 
suggestions  on  questions  of  finance  worthy  of  deep  attention.  The  extent  to 
which  the  book  may  be  circulated  will  be  the  measure  of  its  usefulness. 

Very  truly  yours, 

E.  H.  STOUGHTON. 

Hon.  E.  G.  Spaulding. 


HON.  MONTGOMERY  BLAIR. 

456  Louisiana  Avenue,  ) 
Washington,  D.  C.,  Oct.  19,  1875.  ) 

Dear  Sir: — I  thank  you  for  the  “  Introduction  ”  to  the  new  edition  of  your 
“  Financial  History  of  the  War.”  The  work  will  always  form  an  interesting 
chapter  in  the  history  of  our  great  struggle,  and  it  ought  now  especially  to 
attract  attention  when  the  effort  is  being  made  to  perpetuate  the  error  of 
abolishing  money,  which,  in  effect,  abolishes  property,  and  which  your  book 
shows  was  only  consented  to  amid  the  excitement  of  war,  and  in  the  belief 
that  it  was  necessary  to  maintain  the  Union. 


1 


100 

I  did  not  concur  in  the  measure  even  then,  and  still  think  it  only  aggra¬ 
vated  the  evils  it  was  intended  to  meet,  and  added,  as  General  Dix  estimates,  at 
least  $1,000,000,000  to  our  debt.  Is  there  anything  more  susprising  than  that 
now,  more  than  ten  years  after  the  war,  after  the  man  who,  as  Secretary  of 
the  Treasury,  recommended  the  measure,  has,  as  Chief  Justice,  pronounced  it 
not  only  unconstitutional,  but  a  blunder,  and  as  having  impaired  instead  of 
aiding  our  credit;  and  when  the  great  body  of  those  who  then  supported  it 
to  aid  the  government  have  abandoned  it,  that  a  portion  of  those  who  then 
opposed  the  war,  and  opposed  this  and  all  other  measures  adopted  to  carry  it 
on,  and  denounced  it  as  unconstitutional,  should  now  seek  to  make  permanent 
this  disastrous  policy  ?  The  fact  that  the  Supreme  Court  validates  only  the  legal 
tenders  issued  during  the  war ,  to  which  you  call  attention,  shows,  however, 
that  there  need  be  no  fear  of  that,  and  that  the  court  will  soon  put  down  the 
fraud  even  if  the  people  would  tolerate  it,  of  which  I  have  no  fear. 

Yours  truly, 

MONTGOMERY  BLAIR. 

Hon.  E.  G.  Spaulding,  Buffalo,  N.  Y. 

SENATOR  CHRISTIANCY. 

ft 

Gold  and  Paper — Their  Actual  Value. 

Senator  Isaac  P.  Christiancy,  of  Michigan,  in  his  letter  to  the  Hard-money 
Convention,  in  Detroit,  said:  ‘‘Now,  I  am  so  old  fogy  in  my  notions  and 
opinions  as  to  hold  that,  when  an  individual  or  nation  is  deeply  in  debt,  the 
true  and  only  honest  way  of  getting  rid  of  that  burden  is  the  plain,  old-fash¬ 
ioned  way  of  paying  the  debt  in  money  where  it  was  agreed  to  be  paid  in 
money,  or  in  something  of  equal  value  and  convertible  into  money  ;  and  if 
we  cannot  pay  the  whole  at  once,  or  when  due,  then  to  pay  the  interest  in  the 
meantime,  and  the  debt  as  fast  as  we  can.  If  we  have  not  the  money  to  pay 
with,  then  the  better  plan  is  to  go  to  work  in  any  and  every  form  of  productive 
industries,  producing  values  which  will  command  the  money,  rather  than  to 
adopt  the  plan  substantially  followed  by  a  large  proportion  of  our  people  of 
speculating  out  of  each  other  in  purely  fictitious  values,  like  two  boys  who 
shut  themselves  up  in  the  same  room  for  a  week,  and  both  got  rich,  or  fancied 
they  had  got  rich,  by  trading  and  retrading  jackets  with  certain  offers  of 
boot  money  each  way,  which  neither  ever  intended  to  pay. 

GOV.  E.  D.  MORGAN. 

Newport,  R.  I.,  Sept.  13,  1869. 

Eon.  E.  O.  Spaulding ,  Buffalo , 

My  Dear  Sir: — I  have  read  just  enough  of  the  “  Financial  History  of  the 
War,”  this  morning,  which  you  have  very  kindly  sent  to  me,  to  be  much 
interested  therein.  As  a  history  it  is  invaluable,  showing  as  it  does,  in  the 
clearest  possible  manner,  how  the  means  were  obtained  for  prosecuting  the 
war  which  finally  saved  the  Union.  I  feel  under  great  obligations  to  you  for 
preparing  this  valuable  and  concise  narrative.  I  am,  dear  sir, 

Very  truly  yours, 


E.  D.  MORGAN. 


101 


(From  the  Washington  Daily  Chronicle,  Oct.  4, 1869.) 

HISTORY  OF  THE  GREENBACK. 

Hon.  E.  G.  Spaulding,  of  Buffalo,  who  was  a  member  of  the  Committee  of 
Ways  and  Means  of  tlie  House  of  Representatives  at  the  time  of  the  passage 
of  the  legal  tender  act,  as  well  as  of  the  sub-committee  which  had  especial 
charge  of  that  subject,  has  written  a  “  History  of  the  Legal  Tender  Paper 
Money  Issued  During  the  Great  Rebellion.”  This  has  just  been  published  in 
the  form  of  a  neat  octavo  volume  of  two  hundred  and  thirteen  pages,  and 
constitutes  one  of  the  most  valuable  contributions  to  the  history  of  the  late 
struggle  for  the  preservation  of  the  Union.  It  presents  copious  extracts 
from  the  speeches  of  members  of  both  Houses  of  Congress  for  and  against 
the  bill,  and  is  a  complete  compendium  of  the  views  which  then  prevailed  on 
both  sides  of  the  question,  as  well  as  a  faithful  record  of  the  circumstances 
under  which  the  measure  was  resorted  to.  The  moment  when  the  nation 
was  engaged  in  a  struggle  which  taxed  its  utmost  energies  and  resources,  was 
certainly  not  the  time  for  that  elaborate  consideration  necessary  to  the  develop¬ 
ment  of  the  most  desirable  system  of  finance.  Action,  prompt,  decisive,  and 
practical,  was  what  the  crisis  demanded;  and  while  it  cannot  be  denied  that 
the  issue  of  a  legal  tender  paper  money  unsettled  values,  and  thus  occasioned 
more  or  less  injustice  among  the  people  in  their  settlements  with  each 
other,  besides  increasing  the  expenses  of  the  war  through  the  general  rise  in 
prices  of  all  commodities,  it  is  equally  undeniable  that  it  was  a  most  efficient 
instrument  in  the  hands  of  the  government  in  enabling  it  to  meet  the  exigen¬ 
cies  of  the  time,  and  in  bringing  the  war  to  a  successful  termination.  It  is 
not  as  an  advocate  of  a  particular  plan  of  finance,  however,  but  as  its  his¬ 
torian,  that  Mr.  Spaulding  appears  before  the  public,  and  in  this  light  his 
book  is  of  incalculable  value.  Its  strict  accuracy  is  endorsed  by  the  most 
prominent  of  the  members  of  both  houses  of  Congress  who  aided  or  opposed 
the  measure  whose  history  he  relates,  and  participated  in  the  discussions  by 
which  it  was  preceded.  The  experience  of  that  time  contains  invaluable 
instruction  for  our  future  guidance,  and  even  the  mistakes  committed  may 
be  converted  into  benefits  by  turning  to  profitable  account  the  lessons  which 
they  afford.  This  instruction,  and  these  lessons,  Mr.  Spaulding  has  placed 
before  us  in  the  most  compendious  form  possible,  and  no  statesman,  business 
man,  or  student  of  finance — indeed,  we  might  almost  say  no  citizen — can 
afford  to  be  without  his  book. 

HON.  ALMON  M.  CLAPP, 

Public  Printer. 

Washington,  Oct.  15,  1875. 

My  Dear  Sir:— I  am  indebted  to  your  polite  attention  for  an  advance 
sheet  of  your  “  Introduction  ”  to  the  second  edition  of  that  more  than  excel¬ 
lent  “  Financial  History  of  the  War,”  which  emanated  from  your  pen  some 
years  since.  I  read  that  effort,  soon  after  it  made  its  appearance,  with  more 
than  ordinary  pleasure  and  profit,  and  now  have  just  completed  the  perusal 
of  your  introductory  to  the  forthcoming  edition. 


102 


It  is  but  the  part  of  candor  that  I  should  here  express  the  opinion  that 
your  criticisms  relating  to  the  management  of  our  national  finances  during 
the  period  that  has  intervened  since  the  commencement  of  the  war  to  crush 
rebeliion  occurred,  are  but  merited  and  just.  That  war  found  the  nation 
with  an  empty  treasury,  and  an  imperious  necessity  for  the  ways  and  means 
to  enlist,  equip,  pay  and  sustain  an  army  of  sufficient  force  to  maintain  the 
National  Union  from  overthrow.  That  was  a  trying  and  fearful  crisis,  but 
the  ingenuity  of  statesmanship  proved  adequate  to  the  emergency.  The 
nation  had  neithef  gold  nor  silver  nor  paper  currency  with  which  to  meet 
the  wants  of  that  important  and  critical  period,  and  hence  the  national  faith 
was  pledged  in  bonds  and  paper  money  to  an  extent  that  met  the  demands  of 
a  protracted  and  expensive  struggle.  That  achievement  was  without  parallel 
in  the  history  of  nations,  and  reflected  great  credit  upon  the  wisdom  of  our 
statesmanship  and  the  patriotism  of  our  people. 

To  you,  sir,  as  much  as  to  any  other  statesman  of  that  period,  is  the  nation 
indebted  for  a  financial  policy  that  bore  it  through  the  war  successfully.  I 
apprehend  that  the  second  edition  of  your  ‘  Financial  History  of  the  War!’ 
is  superinduced  by  an  effort  now  being  made  to  inflate  our  paper  currency 
and  postpone  the  day  of  its  redemption  in  gold  and  silver.  This  movement 
may  be  regarded  as  of  serious  import.  It  seems,  indeed,  incredible  that  any 
considerable  number  of  citizens  should  make  an  assault  upon  the  national 
faith  and  credit  by  placing  our  currency  beyond  the  hope  of  immediate  or 
remote  redemption,  but  such  is  the  lamentable  fact.  The  call  for  an  unlim¬ 
ited  volume  of  paper  money  issue,  when  every  effort  should  be  made  in  the 
direction  of  early  resumption,  is  indeed  alarming.  A  more  reprehensible 
policy  at  this  period  of  our  history  cannot  well  be  imagined,  and  it  demands 
all  the  wisdom  available  to  avert  the  impending  evil.  The  government  is 
pledged  to  resumption  at  the  earliest  day  practicable.  To  postpone  that 
important  period  indefinitely,  as  the  advocates  of  inflation  propose,  would 
bring  discredit  upon  the  national  faith  and  honor,  and  cover  our  government 
with  inevitable  disgrace.  And,  beyond  this,  it  would  involve  the  industrial 
and  commercial  interests  of  the  country  in  a  common  ruin. 

Our  currency  is  irredeemable  now,  and  yet  it  is  proposed  that  the  govern¬ 
ment  shall  issue  untold  millions  more,  and  thus  plunge  the  nation  into 
ultimate  repudiation.  This  policy  is  a  delusion,  and  would,  if  it  should 
obtain,  border  upon  crime.  It  is  a  fraud  in  its  intent,  and  its  consummation 
would  stamp  the  nation  with  infamy.  Its  advocates  contend  that  the  issue  of 
five  or  six  hundred  millions,  more  or  less,  of  government  promises-to-pay 
will  give  an  impulse  to  the  business  energies  of  the  country  and  bring  early 
prosperity,  when  its  effect  would  be  to  depreciate  every  paper  dollar  to  a 
standard  of  value  below  fifty  cents.  Now  a  paper  dollar  is  worth  but  eighty- 
five  or  eighty-six  cents,  with  a  downward  tendency.  It  would  not  take  long 
under  inflation  to  bring  us  to  a  point  where  it  would  require  two  dollars  of 
paper  currency  to  purchase  one  dollar  of  gold  or  silver.  Such  a  prospect  is 
to  be  deeply  deplored,  and  the. danger  that  it  foreshadows  should  be  promptly 
met  and  turned  aside. 


103 


If  the  nation  should  yield  to  the  demands  of  the  inflationists,  and  set  its 
printing  presses  and  paper  mills  at  work  to  pour  forth  a  flood  of  new-made 
paper  money,  that  would  afford  no  adequate  relief  to  the  business  interests 
of  the  country.  There  is  more  currency  now  than  can  be  reached  for  general 
business  purposes,  inasmuch  as  there  are  but  two  ways  of  calling  it  forth  from 
the  vaults  of  the  Treasury  and  the  banks.  One  is  to  purchase  with  currency 
property  or  labor,  and  the  other  is  to  obtain  it  by  stealth.  Hence  to  make 
millions  more  would  not  afford  the  promised  relief,  for  the  simple  reason 
that  the  people  do  not  seem  to  possess  the  means  of  purchase,  and  the  chances 
for  theft  are  not  very  favorable. 

The  ills  complained  of,  and  which  seem  to  prompt  to  inflation,  arise  from 
the  fact  that  we  have  in  this  country  at  the  present  time  too  many  consumers 
and  too  few  industrious  producers.  There  is  a  numerous  class  who  have 
undertaken  to  live  by  their  wits  and  upon  the  efforts  of  the  more  industrious. 
This  condition  of  affairs  brings  business  want  and  distress  where  there  should 
be  abundance,  and  those  who  have  thus  brought  themselves  to  such  estate 
by  idleness,  extravagance,  or  mismanagement,  are  nbw  loudest  in  their 
demands  for  inflation.  It  is  upon  such  that  the  engineers  of  this  pernicious 
measure  rely  for  its  success,  and  yet  that  class  would  suffer  the  deepest  dis¬ 
appointment  when  it  should  fully  be  consummated. 

It  occurs  to  me  that  your  views  of  finance  are  peculiarly  adapted  to  the 
work  of  bringing  this  nation  back  to  the  paths  of  resumption,  prosperity  and 
happiness,  and  that  it  will  be  a  fortunate  day  for  the  country  when  they  are 
fully  accepted  and  adopted  as  the  policy  of  the  government. 

In  1861  we  were  called  upon  to  make  sacrifices  to  preserve  the  national 
unity  and  integrity.  In  1875  the  duty  is  none  the  less  imperious  to  rally  in 
behalf  of  honest  money,  and  that  we  may  preserve  the  national  faith  and 
honor.  I  am,  sir,  with  much  respect, 

Your  obedient  servant, 

A.  M.  CLAPP. 

Hon.  E.  G.  Spaulding. 


GEN.  J.  It.  HAWLEY. 

THE  POSITION  FOR  SANE  MEN  TO  TAKE. 

Gentlemen,  I  repeat,  there  is  no  road  to  resumption  through  expansion, 
except  the  road  that  goes  through  repudiation.  If  I  am  not  altogether  wild  in 
this  matter — I  have  with  me  the  boards  of  trade,  the  chambers  of  commerce, 
the  great  merchants  and  bankers  and  financiers — if  I  am  not  altogether  wild 
in  this  matter,  this  is  the  decisive,  the  turning-point  in  the  national  finances, 
and  what  is  of  infinitely  less  importance,  a  turning-point  in  the  history  of 
political  parties.  Many  men  who  long  for  political  reorganization  have 
looked  eagerly  for  the  action  which  was  to  bring  it  about.  Sir,  parties  are 
not  called  into  existence  by  a  proclamation.  Parties  create  themselves. 
They  grow  out  of  some  profound  belief,  some  great  moral  purpose.  You  are 
furnishing  that  belief  and  that  purpose  to-day,  by  making  it  necessary  for 
men  to  rally,  without  regard  to  party  lines,  for  the  defense  of  sound  eco- 


104 


nomical  principles  and  tlie  preservation  of  the  honor  of  the  nation.  There 
is  no  man  so  good  that  I  will  vote  for  him  for  any  office,  from  president 
down  to  constable,  if  he  is  unsound  upon  this  financial  question.  There  is 
no  man  so  dear  to  me  that  I  will  not  fight  him  from  the  word  “go”  until 
the  election  closes,  if  he  is  unsound  on  this  question.  And  I  know  very 
many  men  who  agree  with  me  on  this  point.  But  I  do  not  care  whether 
there  be  five,  or  fifty,  or  five  hundred;  I  am  planted  as  firmly  on  this  ground 
as  in  the  days  when  I  was  a  radical  abolitionist,  though  I  could  not  see  the 
possibility  of  triumph  within  a  hundred  years.  I  believe,  I  know  what  is 
right  upon  this  matter,  and  I  have  no  doubt  that  what  is  right  will  come 
uppermost  in  this  country,  that  the  people  will  sustain. — Speech  of  Gen.  J.  E. 
Hawley,  of  Hartford,  in  the  Home  of  Eepresentatives,  April  1, 1874. 


NOTICE. 


Persons  who  possess  the  first'  edition  of  the  “Finan¬ 
cial  History  of  the  War,”  can  add  this  new  matter 
and  have  it  re  bound  so  as  to  make  up  the  second 
edition. 

The  “introduction”  and  “testimonials”  embraced 
in  the  first  thirty-two  pages  can  be  placed  in  first 
part  of  the  book.  The  additional  appendix  is  paged 
in  continuation  of  the  appendix  to  the  first  edition, 
and  can  be  placed  in  the  back  part  of  the  book. 
The  additional  inde±  is  also  paged  in  the  same  way. 

Baker,  Jones  &  Co. 


